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Trade Trends with Bollonger Bands and Twiggs Money Flow

Archive through December 05, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through December 05, 2010

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bridog
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Username: bridog

Post Number: 198
Registered: 06-2009

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Saturday, October 30, 2010 - 04:01 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Time to lighten things up for the weekend.

The following quote is in the "Daily Reckoning" which pops up in my inbox regularly but doesn't get read much as I find reading it is about as much fun as self flagellation. But at least I got a laugh from the following quote:

"The US Election is ... well ... very American. Candidates include Young Boozer, Krystal Ball, Rich Whitney, whose surname was misspelled "Whitey" and four candidates named Strange."

Cheers


Old enough to know better . . .

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billt
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Post Number: 468
Registered: 02-2010

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Saturday, October 30, 2010 - 05:51 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



QE2/ Titanic

The explanation:

"The whole theory behind QE revolves around the idea that the Central Bank can reduce long-term interest rates. If they can reduce rates they can make other assets more attractive, they can create a refinancing effect, they can entice borrowing/lending and they can alleviate the pressure on debtors. All of this will theoretically help boost aggregate demand and result in sustained recovery. There is only one problem with all of this. There is no historical evidence that QE actually works to lower interest rates. If the goal here is to keep “asset prices higher than they otherwise would be” then the Fed appears to be winning their battle. Unfortunately, there is no evidence showing that there is a fundamental reason why QE would justify such a move. In fact, the market collapses following the end of all three major historical QE programs (UK, USA, Japan) appears to prove that this is bordering on ponzi Central Banking and nothing more. Mr. Bernanke appears to be ignoring the simple historical facts. And those who ignore history are destined to repeat it."

What to 'our panel' say:

1. Faber

Marc Faber Expects Market Sell Off On QE2 Announcement

"Faber anticipates that the Fed decision "could disappoint investors and may prompt a correction in US stocks.... The markets are stretched: weak dollar, strong PMs and strong equities - I think a correction is overdue".

2. Roubini

U.S. a "fiscal train wreck"

"The U.S. economy is a "fiscal train wreck" waiting to happen that risks ushering in a period of stagnation featuring by minimal growth, high unemployment and deflationary pressure, U.S. economist Nouriel Roubini wrote on Friday. But he said that further quantitative easing likely to be announced by the Federal Reserve next Wednesday will have little effect on U.S. growth in 2011."

3. David Rosenberg on GDP

"Q3 GDP Was Just 80 Basis Points Shy Of A Double Dip

The major problem in the third quarter report was the split between inventories and real final sales. Nonfarm business inventories soared to a $115.5 billion at an annual rate from the already strong $68.8 billion build in the second quarter — this alone contributed 70% to the headline growth rate last quarter. If we do get a slowdown in inventory investment in Q4, as we anticipate, it would really not take much to get GDP into negative terrain. We estimate that if the change in inventories slowed to about $94.0 billion in Q4 (about $22 billion below Q3 levels), GDP would contract fractionally. In other words, it won’t take much for GDP to slip into negative terrain.

The recession may have technically ended, but outside of inventories, and the best days of the re-stocking process look to be behind us, this has been a listless recovery. At 60 basis points above zero, real final sales are just a shock away from double-dipping — a shock like looming tax hikes, accelerating fiscal cutbacks at the state/local government level or the millions of “99ers” about to fall off the extended jobless benefit rolls at the end of November."

But my quote of the week: 'Around the World 380 times'

"A trillion $10 bills, if they were taped end to end, would wrap around the earth more than 380 times. That amount of money would still not be enough to pay off the U.S. national debt."....in 5 years they will need to double that to 760 times, but who's counting....







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bridog
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Sunday, October 31, 2010 - 03:30 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Finding value in coal.

The following is an attempt to find value in our coal companies.

Assumptions: In valuing the resource in the ground, rather than fiddle with figures for PCI, thermal etc, I valued it at 1% of the sale price per ton in the 2010 year. In valuing the production business I took it to be the 2010 year gross profit multiplied by 5. BND's value is the resource equivalent to the lowest of the others.

The figures relate to the 2010 year and most have plans to update production during the 2010/11 year. This is not taken into consideration.

Coal Comparison

Interesting that COK and BND appear significantly undervalued while WHC looks overdone.

Whats that old term? E&OE . .


Old enough to know better . . .

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ody
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Wednesday, November 03, 2010 - 01:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Interest rates and banks

I certainly felt that the RB SHOULD raise interest rates, and did not agree - or at least not to a significant extent - with the majority view that it probably wouldn't. So what happened was in no sense a surprise to me, and I am glad that the RB did what I hoped for. I agree with the RB that inflation is a significant threat in Australia, and indeed would go further, even, in seeing house prices as in fact over-inflated already; stressing that productivity growth has not kept pace with the rate that Australians have been paying themselves; emphasising that many people with very low educational qualifications are paid very highly simply as the result of a mining boom; and that, overall, Australians lead unsustainably self-indulgent lives. Australians must learn to be content less, save more, diversify their economy more, etc. All this requires a significant change in mindset, which is not going to be achieved by complacency, lack of saving, over-paying people, and continuing to do merely what we have done.

And as for the banks: I have always felt that Joe Hockey would not, alas, make a good shadow treasurer, and do not consider that he understands at all how banks work. The article below answers some of his points, and at any rate should be studied by Joe. As well, it makes plain why further rises (induced both by the RB and banks) are unavoidable, in Australia.
---------------------------
Westpac's new impairment

Stephen Bartholomeusz

Published [in Business Spectator] at 11:23 AM, 3 Nov 2010


It is apparent that neither politicians nor shock jocks look beyond the headlines of the bank results when they accuse the major banks of gouging their customers.

Commonwealth Bank’s decision yesterday to lift the rate on its mortgage loans by 20 basis points more than the Reserve Bank’s increase in official rates has triggered another wave of hostility towards the banks and Westpac’s impressive result today will only fuel the hysteria.

The critics, however, conveniently overlook the reality that mortgage lending is only one component of a bank’s profitability and that the biggest contributors to the rebound in bank profitability over the past financial year has been a massive improvement in their bad and doubtful debt experience and very strong earnings within their business and institutional divisions.

Westpac’s impairment charges, for instance, fell by $1.84 billion to $1.5 billion. Its institutional bank earnings rose from $361 million to $1.5 billion. Pre-impairment charges its profits (it describes them as core earnings) actually fell one per cent.

That is consistent with the industry experience, where pre-impairment profits were relatively flat over the year and slipped a little in the second half as the continuing edging up of average funding costs steadily eroded their margins.

What about Westpac’s retail bank, which is where the politics of interest rates is focused?

The Westpac-branded retail and commercial banking division’s earnings were down 8 per cent for the full year, but were up one per cent in the September half. The St George-branded business had flat full-year earnings but a 21 per cent increase in the second half.

Overall the group lost 11 basis points of net interest margin for the full year but the net interest margin in Westpac’s retail and business bank was down 19 basis points and St George’s was down 13 basis points.

That’s consistent with the experience of the other majors and quite logical – the banks have been able to pass higher funding costs to their business customers but the politics of home loans has seen them absorbing some of the increased cost of funding their mortgages via skinnier margins. That’s a particular issue for the two Sydney-based banks, which have the dominant share of mortgage lending.

The problem with "doing something" about the banks’ efforts to restore their margins is that their rational response to any attempt to make mortgage lending less profitable would be to lend less – to ration credit to borrowers and focus their balance sheets on lending to businesses and on expanding their lending in less sensitive areas, including offshore.

Westpac’s retail and business banking divisions, including St George, represent less than half the group’s earnings, which means it is simplistic and misleading to look at the headline numbers and conclude that it is overly-profitable because it is gouging its retail customers.

The other point that is worth repeating is that the Reserve Bank will take into account increases in mortgage rates above its own movements in official rates (which have minimal impact on the actual cost of bank funding) when it considers its next rate increase.

Whether monetary policy is tightened by the RBA or by the banks or by both the reality is that, in the absence of another external financial shock, rates are set to continue to rise.

The CBA move probably means only that the next increase in official rates will be delayed relative to what might have happened had it only passed on 25 basis points – and that the banks, rather than the RBA, will wear the blame for the higher mortgage rates.


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bridog
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Wednesday, November 03, 2010 - 03:36 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I’m just a simple fellow, and cannot understand why the cost of overseas funding, presumably in US dollars, for banks has risen recently as stated by the Ausbanks.

Everything I read tells me that interest rates in the US in particular have not gone up recently and are still at an all time low. I take it that the US is predominantly where banks would look for funding which would be in USD.

Therefore I can’t see overseas interest rates being the issue.

Is it the currency then, ie the rising AUD?

About 3 months ago if Ausbank wanted to borrow AUD$1.00 from USbank they would borrow USD$0.85.

If for arguments sake and for ease of calculation the rate of interest was 10% pa, Ausbank would pay 10c pa interest and USbank would receive 8.5c. Now Ausbank is paying only 8.5c for USbank to receive 8.5c. Ausbank is still lending to its customers at say 12% but its margin has gone up from 2c to 3.5c. Not a bad margin (75%) increase, hey!

Now, if AUScustomer has borrowed $100,000 from Ausbank and pays it off, Ausbank only has to repatriate $85,000 to USbank. How good is that! Not only can Ausbank make extra money on the interest rate payment but on repatriation of the capital as well!

Ausbank thinks “how long has this good thing been going on!” and decides to up it’s interest rates some more because it knows that not only will it make more from that, but it will help the currency to continue to rise and multiply the effect and make it an absolute bonanza!

Wheeee! This banking stuff is terrific, is it not?

A simple man would have thought that the time to increase interest rates was when the currency was falling. The simple man then recoils in horror when he thinks “if interest rates are going up in tandem with a rising currency (creating a virtuous circle) what in hell do interest rates do when the currency falls?”

He contemplates that investment property he has been looking out for together with the required mortgage and thinks “Nah, I don’t think so”.


Old enough to know better . . .

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rdumas
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Wednesday, November 03, 2010 - 03:56 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bridog,

Not sure if you have read the following CBA statement.

application/pdf
combank funding arrangements.pdf (210.9 k)



I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Wednesday, November 03, 2010 - 05:00 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bridog: interest rate rises

Bridog, banks cannot afford to gamble the way a short-term sharemarket trader might. In order to protect the long-term interest of those investing in deposits etc with them (I have deposits with WBC for 5 years) they have to look long-term, so that currency fluctuations, while a nuisance in their volatility, cannot unduly influence the strategies that they have to adopt.

Worldwide, the debt crisis has ensured that people are now only prepared to lend if they get a significant return on their money. If I lend to a bank, I want to make sure that my money is safely invested, and the same is true for responsible banks lending to, or borrowing from, other banks. That drives up costs allround. People who do have safe money are reluctant to lend, and will only do so if they get a guarantee of safety and a high yield. Again, the fact that currencies go up and down, while making the process harder because of the uncertainty factor, does not make any difference in principle. If you pay more - as banks currently must do - for money that you want to borrow for several years, you cannot look at short-term fluctuations, but have to pay what the market demands. As well, banks have to make it attractive for people like me to lend them money rather than invest it in the share market, so that means they must pay me a significant yield. People want both safety and a good yield from banks, and this will continue to be the case, as share markets will continue to be erratic. As banks must guarantee that safety as well as good yields, they must place themselves in a position to do so, and this costs them dearly.

As for taking UP interest rates when a currency is high: that is entirely the right thing to do IF THE ECONOMY IS STRONG. The effect of the rise is a reduction in the level of economic activity, and thus inflation, which means that it becomes possible for a currency to go lower. The level of the AUD is way beyond where it has historically been, and though it may not soon fall, it is certainly the case that its rise is due to high commodities prices which will not last indefinitely. Hence it is important to ensure that the economy does not keep overheating. With low interest rates, people will continue to borrow and to over-invest.

Conversely, you LOWER interest rates when there is evidence of reduced and reducing activity, which would result in deflation. This is not AUSTRALIA's problem AT ALL. It IS a problem in the large part of the western world where recovery is not in evidence and where economies are under-performing, i.e. in the US and Europe. But, in the two-speed global economy, we are at the other end (or near that), so while LOW interest rates are needed in UNDERperforming economies, HIGH interest rates are needed in those which are OUTperforming. Sure, high interest rates temporarily may push our dollar up, but as they also push the economy down, the course on which we are set is much better than if we allowed the economy to overstimulate indefinitely, which is the risk that the RB is right to see and to act on.


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billt
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Wednesday, November 03, 2010 - 06:53 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



International Wholesale Funding Market

I have often worried throughout the GFC what would happen to our banking system if the International Wholesale Funding Market imploded.

The Australian Government Guarantee of the banking system at the commencement of the GFC was a wake up call! Without that guarantee the international wholesale funding of our financial institutions may have faltered very quickly.

Currently ‘Wholesale Funding’ contributes 40% of CBA home loan funding. Other Australian banks have much higher percentages.

The majority of this funding comes from international banks with perhaps 'dubious' balance sheets. If there was ever ‘a freeze’ on this funding in a future time of international economic meltdown, where would that leave the Aussie Banks and their customers?

We borrow more than we earn. The implosion that might follow a ‘wholesale funding’ melt down would be catastrophic to the economy of Australia at every level. Repossessions would be rampant, property prices would plummet, business would be without capital, the economy would implode....would the banks even survive?

It is a shame we are not self sufficient in our funding needs! It is a reminder that we are intrinsically linked to the prosperity of the source of our 'wholesale funding'...if they sink, so do we.

The other concern is a bout of rampant hypa-inflation...if the US & Europe see this as the only way out of their debt binged activity, then that hypa-inflation is intrinsically linked through the 'wholesale funding' requirement into the Australian economy. Those interest costs would sky rocket very quickly. Would the value of long term fixed interest term deposits be 'trashed' to pay back the worlds debt?


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ody
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Wednesday, November 03, 2010 - 11:34 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rises in interest rates and banks (more)

Found in a letter on the Eureka Report:

Wages and salaries that rise at 4% pa will not support compounded year-on-year real estate rises of 10% pa forever. Banks cover their risks in such circumstances through the ownership of the mortgage when things turn to tears. The banks could have covered this risk by recouping their capital faster through even higher interest rates but I doubt they would have written as many loans. Real estate bubbles happened on the Liberals’ watch and they chose to let market forces deal with the problem. Blame-shifting now is too late and lacks philosophic credibility.


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ody
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Thursday, November 04, 2010 - 02:07 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



RBA surprising many of the not-so-bright forecasters

Michael Stutchbury gets it right in _The Australian_":

Twice wrongfooted, the markets now blame the Reserve Bank for sending out confusing smoke signals. Instead, they should recall its central scenario: soaring Chinese and Asian demand for our iron ore, coal and gas is about to drive Australia's biggest mining boom for more than a century.

Unlike previous booms, this time the Reserve Bank is determined to prevent the economy from overheating and inflation breaking out. It would take a lot to shift its central scenario, particularly after it fell behind the curve during the pre-crisis China boom.
----------------
ADDITION (Ody): The RBA was quite clear last month that it was in waiting mode, i.e. uncertain as to how to make up its mind. That was a warning, and should have led people to expect a rise NOW. Nothing surprising happened, for those who listen to just what the RBA says, look at the economy, and put two and two together. It was all very transparent. To think that we were not heading in the wrong direction with inflation would have been very remiss of the RBA.

And the rage of people about the rise AND the necessary rise imposed by the CBA (and probably others following suit) is entirely misplaced and misjudged.


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ody
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Thursday, November 04, 2010 - 09:29 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



"Quantitative easing" lifts Wall Street at the close

What, in truth, should we think of a share market that gets lifted solely because a country decides to print more money/buys in bonds??

Yet that is what happened at Wall Street last night, even though of course an envisaged bout of QE had ALREADY been supporting the market, with not just hot air, but the prospect that more money printed means more money at a lower value - for EVERY dollar in existence. A reason for optimism? In that land of wonders and self-deceit, the country that refuses to accept painful truths about itself, i.e. the US of A: yes sirr! Here is a short note from broker Patersons:
----------
After being in the red over the greater part of the day, US stock markets revived in late Wednesday trading. Sentiment was bolstered by news that Fed policy makers had decided to implement additional quantitative easing measures at the November FOMC meeting. It will buy a further US$600B of US Treasuries over the period through to June 2011, in an effort to perk up the US economy racked by joblessness and kill off any signs of deflation.


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ody
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Thursday, November 04, 2010 - 10:29 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



House of cards

Our dollar, and our share market, predictably up on the news of further quantitative easing in the US. Be aware, though, of bears who will feel very uneasy about this, and will readily sell the market down at a suitable moment; similarly, bulls will be very happy to lock in profits regularly. It's a very dangerous market we are seeing.

All the evidence so far is that QE will NOT achieve what it is set out to do, and will only do further damage to the financial system, such as it is, in the US and elsewhere. Prices of stocks are thus going up purely on an "antidote" basis, without having any "right" to being regarded as changed in quality, except that economies in general will deteriorate further, so that their prospects have actually become LESS good.


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ody
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Thursday, November 04, 2010 - 10:30 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



But that is talking fundamentally. In terms of sentiment there are undoubtedly people who will think that stocks will continue to gain as a result of Bernanke's doings, and to that extent the market is "protected".


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billt
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Thursday, November 04, 2010 - 12:22 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hoenig & Greenspan

It is interesting to note that Hoenig has significant concerns on the Fed’s QE2 programme, voting against the package:

Kansas City Fed President Thomas Hoenig, today cast his seventh straight dissent, the most at consecutive regular policy sessions since 1955. “The risks of additional securities purchases outweighed the benefits,” and the “continued high level of monetary accommodation” may eventually “destabilize the economy,” the statement said of Hoenig’s opposition.

Alan Greenspan is greatly concerned on both QE2 and the US Deficit & Debt.

Alan Greenspan said the U.S. is involved in a "dangerous game" with its stimulus strategy. Former Federal Reserve Chairman Alan Greenspan said the U.S. fiscal deficit is “scary” and the federal government needs to cut spending on entitlements. “We’re involved in a dangerous game,” Greenspan said yesterday. “We’re increasing the debt held by the public at a pace that is closing” the gap between our debt and “any measure of borrowing capacity,” Greenspan said. “That cushion is growing very narrow.” U.S. companies may be holding back on investment because of the rising federal deficit, which causes uncertainty about future tax policies, Greenspan said in an opinion article for the Financial Times this week. Weak investment by businesses in capital equipment and fixed assets has helped to crimp the U.S. economic recovery, he said. “You need” austerity, said Greenspan. “We’re going to have to start to cut” from government entitlement programs.


David Bloom, currency chief at HSBC, said the root problem is lack of underlying demand in the global economy, leaving Western economies trapped near stalling speed. "There are no policy levers left. Countries have to tighten fiscal policy, and interest rates are already near zero. The last resort is a weaker currency, so everybody is trying to do it," he said.

U.S. economist Nouriel Roubini hasn't changed his mind either: "The U.S. economy is a "fiscal train wreck" waiting to happen that risks ushering in a period of stagnation featuring by minimal growth, high unemployment and deflationary pressure... that further quantitative easing likely to be announced by the Federal Reserve next Wednesday will have little effect on U.S. growth in 2011."

David Rosenberg reminded us that US GDP is poised for a double dip. With QE2 delivering the equivalent of only 0.5% to US GDP, "the major problem is the split between inventories and real final sales. If we do get a slowdown in inventory investment in Q4, as we anticipate, it would really not take much to get GDP into negative terrain", wiping out all of the QE2 impact.

Marc Faber still expects a sell off. "The markets are stretched: weak dollar, strong PMs and strong equities - I think a correction is overdue".

The market is due for a correction. The quantum of QE2 and the Election result was priced in many weeks ago.

However, I would not be surprised that a multi month rally runs from December to April on the back of QE2, and the prospect of QE3 & QE4. Q4 GDP figures in January might prove a stumbling block as will ongoing poor unemployment numbers...but with the Fed pump priming the markets at $100 billion a month, the 'Santa Rally' may have legs, albeit wobbly ones.


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ody
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Friday, November 05, 2010 - 01:42 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Wall Street up, predictably, on low dollar caused by QEII

This second round of QE (i.e. mopny printing, and thus increasing the money supply) has immediately led Americans to push up shares, which has nothing to do with encouraging healthy and sustainable growth in the American company, and means that shares that aren't earning more than before are simply leveraged up. The situation is now far more dangerous again than it was before.


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ehmu
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Friday, November 05, 2010 - 05:08 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



IMO, they are also rigging the spreads on the out of money puts & calls in order to paint a false picture on the VIX.

It's all a part of the "feel good" spin for the markets.

Kind of like MSG in your gravy. Fantastically pleasing taste, but then we're unable to digest it for an extended period of time.

Now, try to imagine what it was that we ate, smothered in that gravy (animal or vegetable?).




_____ n a m a s t e

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billt
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Thursday, November 11, 2010 - 08:13 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



News from the FED - the 'All Bran' has kicked in

Rather than purchases every two or three days, now the FED is going to do it daily!! Obviously the 'All Bran' has kicked in....$105 billion in the next four weeks, to get the ball rolling:

"Tentative Outright Treasury Operation Schedule (Toto's!!)
Across all operations.....the Desk plans to purchase approximately $105 billion. This represents $75 billion in purchases of the announced $600 billion purchase program and $30 billion of principal payments from agency debt and agency MBS expected to be received between mid-November and mid-December."

Wasn't QE2 hoping to turn yields down to help kick start the US economy...? Well the yields on the shorter term treasuries are turning up. (Uncle Ben must be spewing!) Is QE2 discouraging buyers driving rates up, or are investors fleeing US Treasuries all together....surely not!

'...Oh, say does that star-spangled banner yet wave
O'er the land of the free and the home of the brave?...'


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peterloh
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Thursday, November 11, 2010 - 11:46 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Brian, I have been watching BAU since you mentioned it last, strictly on research. This looks like a Weinstein stage 2. After breaking out on volume, it has now returned to retest the support level at low volume. It is ready to go again with immediate target at 40c.I just got some yesterday.




-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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bridog
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Saturday, November 13, 2010 - 02:00 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Peter,

BAU: I got in at 25c and out at 32c. I read various reports from Comsec research and looked up a link that Sway or maybe Ken (thanks guys) left from a previous thread and basically decided I didn't have a lot of faith in the company.

They have dudded their shareholders by issuing stock at a discount without offering existing holders the same deal, including a Chinese company at about half the going stock price. They are in a battle with the WA Government, local environmentalists, and local farmers and cannot commence mining. While they say they have 24k km2 of tenements, I could not find any reference to a JORC resource. As far as I could tell their alumina refinery at this stage is just a pie in the sky. That would be nightmare to get approved.

My take on the China involvement is that they have taken an option on the show by buying some shares at half price at the time. If something happens those China boys will in on the ground floor, otherwise it will be just some petty cash for them to write off.

Just my thoughts Peter, I hope you do well (who knows may turn out to be another FMG) but I can't bring myself to trade them for now.

Best regards


Old enough to know better . . .

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bridog
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Saturday, November 13, 2010 - 02:29 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Peter,

Im posting again my Coal companies comparison with the difference being that previously I just took the stated cash on hand, but have changed this to Net Cash which is Cash + Investments - loans at interest.

This calculation made a difference to NHC for example.

My favourite is Cockatoo Coal which seems to be mispriced at the moment, as is BND. You'd think some predator would be running the ruler over COK about now.

Coal Compare


Old enough to know better . . .

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ehmu
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Sunday, November 14, 2010 - 06:58 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



cok 1.33/.545=value to price=2.44

mcc 14.48/11.75=value to price=1.23

bnd 3.14/1.25=value to price=2.51

nhc 5.19/4.99=value to price=1.04

whc 5.07/6.89=value to price=.74













_____ n a m a s t e

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ehmu
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Sunday, November 14, 2010 - 07:05 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sorry, just noticed error on fib base for COK chart








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ody
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Monday, November 15, 2010 - 11:22 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Useful article by Robert Gottliebsen (from Business Spectator)

I think his points are in general good ones, and - at least in part - are likely to give some indication of where our economy is heading and thus where difficulties or successes for companies (and individuals, including investors) may occur. The share market generally acts on what it perceives as the likely future for the economy: this is certainly true of a majority of big fund managers, who to a significant extent determine where the market goes. The news is not all good - particularly for the sectors he discusses. And much of what he says seems plausible to me.

It's not just important for the share market, but also for one's finances in general.
---------------------------------------------------
Brace for a year of change

Robert Gottliebsen

Published 7:31 AM, 15 Nov 2010 Last update 10:08 AM, 15 Nov 2010

Welcome to Australia 2011. A series of remarkable events unfolded over the weekend which will bring dramatic changes to the business environment in the Australian non-resource sectors next year. Many parts of the economy are in for a hard time, but we will start with the bright spots. Employment remains strong and, although there are signs of weakening, this is a key driver for the economy.

Several of the banks, including CBA and Bendigo, say that term deposit interest rates are going to rise. Australia’s self managed superannuation funds and private savers have been enormous supporters of term deposits and the CBA says it has more deposit customers than home mortgage holders.

Although these savers worry about inflation, higher interest rates in this sector are good news, especially when combined with a higher share market. On the other hand, lower house prices makes them wary.

Overall, older people with savings are going to be more confident in their spending.

Then we go to the younger family market, where a survey by Liberty Financial shows that half of all home loan customers aged in the 25-54 bracket devote at least 30 per cent of household income to mortgage repayments despite the fact that more than 60 per cent of those in the study currently pay less than 7 per cent interest. Accordingly, mortgage stress will accelerate rapidly in 2011 as the earlier interest rate concession deals expire and most young families begin paying around 7.8 per cent or more.

Retailers can sense this and Myer took the extraordinary step of announcing that it had to resume heavy discounting after trialling a period of limiting discounts. Australian consumers have been hooked on bargains and the high level of mortgage stress means that they are not going to change. This is not good for retail margins, although the margins are helped by the effect of the strong dollar on import prices.

The November slump in auction clearances means that house prices are going to decline in many areas. The fall will be particularly noticeable in Sydney and to a lesser extent Melbourne apartments where prices have previously been held up by Chinese buyers who have withdrawn from the market because of the high Australian dollar.

Only a small percentage of Australians sell their house each year, but house prices are a major re-enforcer of consumer confidence.

After the RBA raised interest rates to 4.75 per cent and the CBA went even higher, the Roy Morgan Consumer Confidence index fell by 1.8 points to 126.0. It’s now 4.1 points lower than its five-year high of 130.1 achieved in late October. The Morgan Consumer Confidence index is very sensitive to interest rates and is a forerunner of retail spending changes.

Investment banks are predicting another 1 per cent rise in interest rates, which would be catastrophic for the non-resource economy. That’s why I don’t think it will happen. But the Transport Workers Union wants a 16 per cent wage rise over three years. If they get anything like that from the large transport companies, then the Reserve Bank will have to take extreme action because the new industrial relations laws will cause any TWU wage rise to spread quickly. The big transport companies have an enormous burden on their shoulders.

Many of the forces that were underlined over the weekend were not in the market two or three months ago and their effect on the business community will not be apparent until after the Christmas break.


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ody
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Thursday, November 18, 2010 - 01:50 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ireland about to accept bail-out

The latest news appears to be that Ireland will, after all, accept a bail-out. Foolishly, it had earlier argued that it didn't need one, and would cope well enough. Truth seems now in the process of getting accepted by this nation of romantics, and markets appear to be expressing their sense of relief by pushing up their futures. From all I can see the package will be quite large, and anxiety about Ireland has certainly kept down share markets worldwide: however, our times are such that bail-outs are very widely accepted as a normal - nay, desirable and healthy - solution for anyone in serious debt (and others who might be harmed by such parties). Throwing money at problems is all the fashion, and we can see again and again how share markets love this approach - so very reassuring, they believe, as things "keep ticking over" until (no doubt!) matters improve of their own accord. Just keep doling out money; don't withdraw it too quickly; and things will be allright. If there is a further hitch, throw yet more money at the problem - print it if you need more. And, so far, share markets have on the whole condoned the approach, although periods of worry do occur, and sustained, sizeable rises are not that easy to maintain without at least some hesitation here and there. The correction that many of the more thoughtful people think necessary is, however, slow in the coming, or is difficult to sustain in its turn.

I don't know how long ago I first started saying that in essence share markets seemed to me poised for a long period of going sideways. But I do note with interest that ours hasn't actually moved much over the last 12 months. However, I had not really expected the April high, so although my general expectation has not been wrong, there has been more up-and-down movement than I had anticipated.


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pjf000
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Thursday, November 18, 2010 - 02:15 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Where are we in the cycle?

Shock, Denial, Anger, Bargaining, Depression, Testing, Acceptance.


Markets can remain irrational longer than you can remain solvent

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ehmu
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Friday, November 19, 2010 - 01:44 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




pjf000 wrote on Thursday, November 18, 2010 - 03:15 pm:

Where are we in the cycle?




Recently, things in the markets change so rapidly that I can experience all of your suggested stages in the course of any given hour----except possibly the last (acceptance), which for me takes a little longer than one hour.




_____ n a m a s t e

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ody
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Friday, November 19, 2010 - 01:47 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Share market about right?

Intuitively, as well as otherwise, this is where I feel our market should approximately be at this point: not much above 4700 for the XAO, and lower for the XJO. Exceptionally - these days - I think the market has got it more or less "right". Anything above 4800 for the XAO shows optimism failing to take account basics. Of course, that does not mean it cannot go to 5000 or over on pure sentiment.


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ody
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Saturday, November 20, 2010 - 09:47 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Why our dollar and commodity prices may go lower ...
(Inflation in China rising sharply)

From The Australian

CHINA hiked banks' reserve requirements for the second time in as many weeks, stepping up its fight against a surprising jump in inflation.

The increase will withdraw more cash from the banking system.

The move by the central bank late last night follows a Wednesday announcement by the State Council, the executive arm of China's government, of numerous measures --including price controls if necessary -- aimed at containing food and commodity prices. It also comes on the heels of a previous increase in the so-called reserve-requirement ratio just last week, on November 10, and last month's hike in benchmark interest rates, which was the first in nearly three years.

Official data earlier this month showed China's consumer-price index rising 4.4 per cent in October from a year earlier, the fastest pace in two years and threatening the government's target to keep average inflation in 2010 around 3 per cent. The gain was largely driven by food costs, with vegetable prices in particular jumping in recent weeks.

Chinese stock markets have fallen sharply since the inflation figures were issued, with investors worried the unexpected rise in inflation will force the government to sharply slow down the economy to compensate.

"Rate hikes and liquidity management can and need to play a critical role to control inflation expectations and prevent food inflation from spreading to the general economy," said Wang Tao, China economist for UBS in Beijing. But, she added, "fears of aggressive macro and monetary tightening are overdone," since China's government is also clearly worried about the weak outlook for global growth.

China is not alone in facing higher inflation: Global prices for grains and other foodstuffs have marched since July, as bad weather and weaker-than-expected crops in several countries strained agricultural markets. But the price increases are worrisome for China given the flood of money pumped into the economy to maintain its rapid growth: Bank lending is up nearly 20 per cent so far this year on top of a 32 per cent expansion last year.

The government has already spent much of the year in a largely unsuccessful attempt to contain soaring housing prices, which have caused discontent in the urban middle classes and threaten to lead to an asset bubble. The addition of food prices to the inflation menu adds to the strain on consumers, particularly those in lower income groups, and seems to have strengthened the government's resolve to withdraw from its all-out stimulus policy.

The People's Bank of China has signalled in recent weeks that it wants to return economic policies to more normal settings, after keeping them loose and expansionary since the onset of the financial crisis in late 2008. Economists generally expect the authorities to continue to increase reserve requirements and benchmark interest rates, as well as continue its recent appreciation of the currency. The Chinese yuan has been rising against the dollar by roughly 1 per cent a month since September.

The repeated moves by the central bank "will help the government dampen inflation expectation," said Morgan Stanley economist Wang Qing. Central bank officials also want to damp any inflows of speculative capital into China resulting from the US Federal Reserve's move to buy bonds to push interest rates down further, he said.

The official reserve ratio for major banks will rise to 18 per cent with last night’s announcement, though China's largest banks are subject to a higher ratio and the smaller banks to a lower one. The government's official target to keep new bank lending within 7.5 trillion yuan ($1.15 trillion), this year is also in danger of being breached, with banks pushing out more new loans than usual as the end of year approaches.


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ody
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Why I predominantly find the share market a bore at present

Answer: because by and large it is a non-performer, in the present climate. I left it in October last year, thinking that it might not go much higher. I was wrong in that it did reach a higher level in April. But as a BASIC judgement, and for someone not trading the market on a weekly or otherwise short-term basis, my decision was actually quite right, for, if the STW is to be taken as a guide, the past 12 months have brought us very little, despite huge crowing from various voices in the financial industry.

Imagine one had actually invested in STW and held FOR A YEAR. According to Stock Doctor one's total return, including yield, would have been 2.53%. Was it possible to outperform this with ease? Of course: all one had to concentrate on was fixed interest, whether in deposits or in interest rate securities (several of which give one franking and in any case perform better than deposits, though with somewhat greater risk). I would have found it shameful to have made no more than 2.53%.

And for three years? Total return = -6.89% per annum. For five it has been + 4.06%: big deal.

"Buy and hold, even in a crisis, and within a short term you'll make much more than in fixed interest"? NONSENSE. Of course, that is not to deny that there ARE periods when one makes much better money in the share market.

The trouble is really that with the various difficulties which there are in the world currently and which people are worried about it is very difficult for many Australians REALLY to believe that they must buy "the market". To do well, some can perform OK short-term, and good luck to those who make more than they lose. Others do well with exceptionally good stock selection. But we would not have this sort of result if most people were confident about bidding the market up. Clearly they are not. And I see no good reason why, in the near future, they will change their minds. This policy of printing money and keeping interest rates at zero in the US has certainly not inspired OUR market. And with China having to fight inflation there is room for caution concerning that country as well, and hence commodities prices.

An then, in Australia, our pollies are a pain to behold as well. First we had Labor stuffing up in the resources area (still not clearly resolved), and then, unbelievably, a populist shadow treasurer thought it necessary to undermine confidence in our banks as companies to invest in. For one thing, Hockey never stops to think how large a percentage of money gained by banks is returned to shareholders through very generous dividends - many of the mums and dads of Australia greatly benefit from such a cashflow. Nor does he understand that the higher costs to obtain money which the banks complain about are very real.

Oh ... and I forgot about the debt problems in Europe. These too don't inspire confidence. All the things that have undermined people's confidence in the last few years keep on doing so periodically. It's a wonder how they bounce back here and there to take markets up, given that the initial reasons for their doubts have not lost any of their validity.


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rdumas
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Sunday, November 21, 2010 - 03:41 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Folks,

Here's a fun video clip of Peter Schiff talking about American debt and China. It only lasts about 3 minutes but it puts things in perspective about how America deals with debt. It should really worry the Chinese.

http://www.youtube.com/watch?v=NkEtArDFNYA&feature=player_embedded


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Wednesday, November 24, 2010 - 07:52 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Good one, Rudy!

Yes, what you show should indeed worry the Chinese, because it hardly exaggerates what is actually happening.

Overnight (our time), Wall Street fell quite a bit (global sentiment is turning sour again). This is how CNN put it:

"Stocks were hit with a trifecta of gloom Tuesday as violence erupted on the Korean peninsula, worries about Europe's debt crisis expanded and the Federal Reserve issued a dour economic outlook."

The impact of violence on the Korean peninsula would continue to be serious, of course, if matters there were to escalate or simply even to remain much as they are: people will not relax until there is some kind of security in place - which will not be easy to obtain.

Worries about Europe will CERTAINLY continue, and probably at a higher level of intensity than happened post-Greece now that it is becoming clear - as should always have been realised - that these debt problems will trigger off huge payments of bad debt by Germany as the main recovering nation with actual money, as well as others who can produce it. Thus the economies of the performing European nations will be harmed by forced generosity while the debt problem will not in fact be solved and the non-performing European nations will continue to manage matters badly. A significant crisis of confidence in this whole situation is certain, and the more so because Europeans who share the euro as a currency dare not go their separate ways. Everything will be done to keep the often harmful yoking of incompatible countries in place. The problems are those which countries like Australia would happily see as not affecting them, but the scale of the European Union, as an economy, will in fact impact globally, for one thing as it is a large market for China, which is suffering from an over-active economy, but still will not benefit from the fact that lower export earnings will be inflicted upon it. So Australia will not be able to look at all this with smugness.

And although any sensible person has been able to see for long that America's prospects are NOT good, the "official" statement to the effect that they aren't will change perceptions among the optimistic.

The COMBINATION of these events will currently certainly damage market sentiment. But even if the fear about the Korean situation were to be removed (and how will it be?), the other facts - which are very tangible - are sure to produce less optimism in share markets.

All this was always foreseeable, and inevitable, not least given the failure, almost worldwide, to tackle debt problems rather than aggravate them by non-action or the wrong kind of action. It has always only been a matter of time before problems would resurface, and they are both big and genuinely harmful. Thus it also only was, at all times, only a matter of WHEN share markets would get knocked about during the continued GFC, not IF they would be.

I do not mean that EVERYTHING is going badly. It is not. But it is not going well enough to support a positive share market in any really substantial way over any enduring period. At best markets are likely to go sideways (which in essence they have done for more than a year already), but disappointing share prices are now increasingly likely, even if there will probably be alternating waves of hope and fear. Fear is more likely to predominate than hope, as things stand, and that means that falls are probably more likely than rises. Nor, with a major financial crisis like this, should that surprise anyone, intrinsically and historically: whatever people like Bernanke might like to believe, you just CANNOT endlessly spend your way out of trouble.


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billt
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Wednesday, November 24, 2010 - 10:31 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Words of wisdom from Nouriel:


"Roubini Maps Out Nightmare Scenario of Domino Debt Collapse in Europe "



"We have too much private debt in the case of Ireland," according to Nouriel Roubini.

The nub of the crisis is this: "We have decided to socialize the private losses of the banking system. Now you have a huge increase in public debt—going from 7 percent to 100 percent of GDP. Soon it will be 120 percent."

And, turning more broadly to the rest of Europe, "Greece is already at 120 percent."

Roubini believes that further attempts at intervention have only increased the magnitude of the problems with sovereign debt. He says, "Now you have a bunch of super sovereigns— the IMF, the EU, the eurozone—bailing out these sovereigns."

Essentially, the super-sovereigns underwrite sovereign debt—increasing the scale and concentrating the problems.

Roubini characterizes super-sovereign intervention as merely kicking the can down the road.

He says wryly: "There's not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone."

But, despite the paper shuffling of debt at the national level—and at the level of supranational entities—reality ultimately intervenes: "So at some point you need restructuring. At some point you need the creditors of the banks to take a hit —otherwise you put all this debt on the balance sheet of government. And then you break the back of government—and then government is insolvent."

And then there is the case of France. "Sarkozy came to power saying 'I'm going to do lots of reform.' He has not done it. Right now, he is weak. He might lose the election. And, therefore, they are going to delay fiscal austerity and reforms."

And that, according to Roubini, is a major problem for the fiscally challenged French.

The bond vigilantes may have woken up first in Greece, Ireland, and Portugal. "But France," Roubini says, "does not look much better than the periphery."

In Roubini's view, the probability of the right steps being taken in France soon is not great. "Politically they are constrained from making reforms." For example, after the French made relatively small changes in their social welfare system—raising the retirement age from 60 to 62 —"You had massive riots in the streets."

And that, in Roubini's view, was just the beginning of the necessary austerity.

"What's going to happen when you do more radical reform? That's an open question in the case of France."

Looking beyond France to the future trajectory of the crisis, Roubini says, "The next one in line is going to be Portugal. "Due to the severity of Portuguese debt problems, Portugal is going to lose market access—and that means they are going to require IMF support as well.

But the real nightmare domino is Spain. Roubini refers to the Spanish debt problems as "the elephant in the room".

"You can try to ring fence Spain. And you can essentially try to provide financing officially to Ireland, Portugal, and Greece for three years. Leave them out of the market. Maybe restructure their debt down the line."

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side—and also too big to be bailed out."

With Spain, the first problem is the size of its public debt: €1 trillion. (Greece, by contrast, has €300b of public debt.) Spain also has €1 trillion in private foreign liabilities.

And for problems of that magnitude, there simply are not enough resources—governmental or super-sovereign—to go around."



USA & a multitude of individual states are in exactly the same position...



"Turning to the United States, Roubini said the latest push to ease monetary policy by the Federal Reserve is a "necessary evil."

He estimated, however, that the Fed's new $600 billion in bond purchases would add only 0.3 percentage point to next year's growth rate, not enough to get the economy expanding at its full potential. "



If we do get a slowdown in inventory investment in Q4, as many anticipate, it would really not take much to get US GDP into negative terrain…


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billt
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Wednesday, November 24, 2010 - 06:02 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Things I have read:


North Korea fires artillery barrage on South
The USS George Washington carrier strike group will join South Korean naval forces in the waters west of the Korean peninsula 28 Nov to 1 Dec to conduct air defense and surface warfare readiness training that had been planned well before Tuesday's attack, the White House said. (...that's Monday folks, stock up on tinned food & water)

Asia stocks fall amid widening Europe debt woes
The declines in Asia came a day after the region's stocks rose on initial relief about the European Union and International Monetary Fund bailout of Ireland's heavily indebted banks. But that optimism quickly evaporated. There are doubts Ireland's government will survive long enough to secure parliamentary approval for a budget that will include multibillion dollar spending cuts as a condition of the outside assistance. Experts also said the bailout -- the total amount of which is still being decided -- would do little to shield other heavily indebted countries from a potential collapse in investor confidence, most immediately Portugal but also potentially Spain, Italy and Greece. (see earlier post re Roubini)

China bans hoarding of oil, coal to cool prices
China is banning hoarding of oil, coal and other key commodities, seeking to ensure supplies and cool prices that have surged to politically volatile levels despite repeated moves to curb inflation. The moves reported by state media Tuesday are Beijing's latest effort to counter unease over inflation that jumped to a 25-month high of 4.4 percent in October. Authorities want to reassure a nervous public that the government can handle inflation pressures that some worry could spiral out of control. (....are they hoarding it in their cupboards? Jerry Cans of Unleaded, Buckets of Coal, Gold Bullion - should have been Silver - under the bed....)

Why Stocks May Have Seen All Their Gains for This Year
"Based on momentum and sentiment extremes achieved at the nearby highs, it seems likely that the stock market will be on a declining path, at least through year-end," David Rosenberg, economist and strategist wrote in his daily analysis. Rosenberg cited five factors conspiring against the markets: China monetary tightening amid inflation fears; a rescue plan for European debt not working; fiscal austerity in the US with the political change coming when the new Congress takes over in January; gasoline price hikes; and questions over whether a slew of tax breaks will be extended. (Rudy & the 4G's have a different plan with a final rally to early 2011)

Growth faster but not enough to dent joblessness, but..
"The rise in consumption suggests that household spending may be starting to gain some traction," said Paul Dales, a U.S. economist at Capital Economics in Toronto.
Third-quarter growth also received a boost from government spending as state and local expenditures were revised up.
Business investment was a touch higher than initially estimated, lifted by much stronger spending on equipment and software, though investment in structures was weak.
But the contribution from business inventories was surprisingly smaller, which economists said signaled a shift toward more sustainable growth. "Growth is not anymore being provided exclusively by temporary support factors, such as the stimulus program and private inventories, but is coming more and more from domestic demand," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. "The critical hand-off is under way. This is good news as it makes the recovery, as slow as it is, more sustainable." (...until QE2 runs out, and you have a monster debt to pay back, taxes higher, and growth grinds back to nothing...)

Fed lowers outlook for economy through 2011
Federal Reserve officials have become more pessimistic in their economic outlook through next year and have lowered their forecast for growth. The U.S. economy will grow only 2.4 percent to 2.5 percent this year, Fed officials said Tuesday in an updated forecast. That's down sharply from a previous projection of 3 percent to 3.5 percent. Next year, the economy will expand by 3 percent to 3.6 percent, the Fed said, also much lower than its June forecast. (...based on QE2 expenditure and US military expenditure of $200b /month and 95% debt/gdp...of course it is sustainable...)

Fed minutes: Officials clashed over bond purchases
Federal Reserve policymakers clashed over the benefits and risks of launching a $600 billion program to rejuvenate the economy, but voted for it anyway, according to minutes of their closed-door deliberations released Tuesday.(...perhaps they threw the printing presses at each other..)

Fed Minutes Show Debate on Dollar
Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, was the only member to deem an increase in the Fed's securities holdings as posing more risks than benefits while most members anticipated that the downward pressure on long-term interest rates would lift asset prices. Some noted that the plan could reduce the foreign exchange value of the dollar.(...good old Tom, he will be in the history books in the future, as 'Mr I Told U So'....)

Fed Minutes of November 3 Meeting
Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.
Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy. (...and Tom most probably will be right...despite his surname sounding like a European Beer label)

Economy in U.S. Grew 2.5% in Third Quarter, Revised From 2%
The U.S. economy grew more than previously calculated in the third quarter, led by stronger consumer spending and fueled by labor income gains that may stoke demand into 2011. The revised 2.5 percent increase in gross domestic product compares with a 2 percent estimate issued last month and a 1.7 percent rise in the second quarter, figures from the Commerce Department showed today in Washington. Consumer purchases rose at the fastest pace since the last three months of 2006. Employee wages in the six months through September were revised up by about $59 billion, indicating Americans may ramp up their spending heading into the holiday shopping season. Along with gains in corporate investment in new equipment, the figures show an evolving expansion led more by demand and less by inventory restocking. (...well that is some good news to end with...I think!...but don't expect this to be sustainable)


This is what the Chinese think:





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cat_lady
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and wasn't that a sight for sore eyes over on the EW thread!!

here's to a christmas rally eugenio!

I'm really enjoying MCE at the moment. hope you are too!
GXY is a bit boring.
OZL missed getting off the boat on that one, but I'm thinking there might be a bit more of a kick left in it before christmas.

anything you like to share?

cheers
cat lady

cheers
cat lady



Without my morning coffee I might as well be a dog

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ody
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The return of our absent friend ...

Many thanks, catlady, for drawing attention to Eugenio's return. Eugenio, I am delighted to see you are well enough to have come back to IC. Rudy has been a great friend to you and those he has managed to keep informed. I have greatly missed your company. Hope that you will keep well from here on!

I am not sure I share the view that we shall necessarily get much of a rally, though it is not impossible. Whether we do or don't will depend on a number of factors influencing the current mood, and most of them continue to be negative. The idea that Ireland "has been taken care of" will produce some feeling of hope among some, but many know it means nothing, and not only disregard this supposedly good news but look with fear at Portugal and Spain. Of course that does not prevent an upward move in the interim, after a few days, perhaps, as the market has been rather negative, and it is conventional for there to be SOMETHING of a Halloween stint somewhere. But I'd be surprised to see anything big before the year is out. And I agree with you in being sceptical about 5000. China is not exactly exuding hope either. For the most part we are typically seeing the events of a second-phase denouement in a financial crisis: after much misguided optimism, the realities of the situation - i.e. lack of real improvement, ongoing debt problems, etc - come to haunt people, and, although they will try to rally, anything unsettling will soon make them feel doubtful.

The only figure that continues to surprise me, as an exception, this year, is the 5000 in April. That was higher than I had expected. Otherwise the market has been pretty much what I had thought it would be, i.e. one in essence going nowhere, except in relatively short bursts of volatility in either direction.

The ROE is one of the things to look for in companies. It is is often disappointing at this stage, and many companies have disappointing earnings, either now or in prospect. The banks, for example, look cheap, and are not likely to suffer as much from bad political interference as many fear: but earnings from e.g. real estate cannot go much higher, as that market is on the whole stabilising or going soft. This must negatively impact on the banks. Borrowing abroad continues to be a problem for them, as the cost has increased. In a way, the political attack on the banks (this time coming from the Coalition as much as from Labor) is just as silly as that on the resources industry from Swan was earlier: in both instances we see populism at work. Those pursuing these causes look at earnings that HAVE BEEN. They don't understand the economics at work, and that those earnings will be at very serious risk if markets are going to be handicapped by ignorant and damaging interference. This is definitely NOT the time to try and stifle the banks.

Although with Hockey as Shadow Treasurer the Coalition does not look promising as an alternative government, I was delighted to see Victoria throw out Labor. An important turning point, I think, for the nation. In general, I feel the voters want more realistic and practical government, as befits this nation. The so-called new paradigm (!!) has probably come to an end. If the quality of political life improves a bit that might help confidence levels in Australia, which currently are not high.


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p3t3
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ody wrote on Monday, November 29, 2010 - 11:03 pm:

The return of our absent friend ...


...and good to hear from you too, Ody. Things have been a bit quiet on this thread lately, though BillT has been helping out to fill up some of the gaps left.

As usual it is hard to find anything to argue about in what you've said. Populism over bank bashing is appalling, as was the populism over the mining tax before it. Labor had been in power too long in Victoria - political parties need to be sent back to the opposition benches on a regular basis to renew and refresh policy formation. In politics, as in trading, we learn far more from our defeats than our successes....though some successes are necessary to sustain us.

Happily I don't share your boredom from observing the markets. I manage to find them endlessly fascinating, even when they're in super-duper-slow-motion......often the precursor to a big move. They do, after all, represent human behaviour writ large (in spite of the robot trading volume).

The festive season is now upon us. A time for socialising, goodwill and Santa Claus rallies.

Here's to all the reasons there are to celebrate, including the return of Eugenio.

best to all
p3t3


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baysider
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Hi all

A big welcome back to Eugene, looking forward to catching up for our regular coffees again.
One you might like to look at is AQA, broke out to new 6 month highs today on the back of a special 1 for 10 fee share offer. I was in already and won't sneeze at 10% extra for free. December 9th is cut off date so still time to get on board as SP is rising.

Cheers everyone


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billt
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Hi Everyone,


Welcome back Eugenio - all you missed was a wave 4 down, and Rudy & his Merry Men are predicting a wave 5 starting this week until next year, Santa with bells on, ....so you timed your absence perfectly!

Two articles today which caught my eye in the Fairfax press:

The first is about China, and it gives concern for the immediate future for investors here in Oz'.

The second article is the fast declining Oz' GDP figures out tomorrow... is our 'Alice in Wonderland' economic performance beginning to pull back like everywhere else?



Bill









Asia's engine of growth in the red zone
Louise Armitstead
November 30, 2010

China could be the next credit bubble, writes Louise Armitstead.

An American hedge fund manager who has made millions predicting the crises in US subprime market and European debt has launched a fund to bet on an imminent implosion of China.

Mark Hart, who runs Corriente Advisors from Fort Worth in Texas, told investors in a presentation that China is in the ''late stages of an enormous credit bubble''.

When this bursts, the financier says he expects an ''economic fall-out'' that will be as ''extraordinary as China's economic out-performance over the last decade.''

Asking for a minimum $US1 million stake, Corriente said the fund would use sovereign and corporate credit default swaps, interest rate and foreign exchange options to cash in on the collapse.

Mr Hart, who launched a fund betting against subprime loans as early as 2006 and in 2007 a fund focusing on a European debt crisis, told investors: ''Complacency among market participants regarding China is eerily similar to the complacency exhibited prior to the US subprime crisis and European sovereign debt crisis.''

In the presentation, which amounted to an attack on the prevailing belief that China is an engine for growth, the financier argues ''inappropriately low interest rates and an artificially suppressed exchange rate'' have created bubbles in sectors including:

Raw materials: Corriente says China has consumed just 65 per cent of the cement it has produced in the past five years, after exports. It is now producing more steel than the next seven largest producers combined: it has 200 million tonnes of excess capacity, more than the EU and Japan's production so far this year.
Property construction: Corriente reckons there is an excess of 3.3 billion square metres of floor space in the country, yet 200 million square metres of new space is being constructed each year.

Property prices: The average price-to-rent ratio of China's eight key cities is 39.4 times. This figure was 22.8 times in America just before its housing crisis. Corriente argues: ''Lacking alternative investment options, Chinese corporates, households and government entities have invested excess liquidity in the property markets, driving home prices to unsustainable levels.''

Banking: As with the credit crisis in the West, the banks' exposure to infrastructure credit bubbles is not obvious because the debt is held in Local Investment Companies, shell entities which borrow from Chinese banks and invest in fixed assets. Mr Hart reckons ''bad loans will equal 98 per cent of bank equity if LIC owned, non-cash-flow producing assets are recognised as non-performing.
As a final blow, Mr Hart says the market belief that the Chinese government has ''ample resources'' to bail out its banks is flawed. Corriente's analysis of the ratio of government debt to gross domestic product comes out at 107 per cent, five times higher than official numbers.

The result is that, rather than being the ''key engine for global growth'', China is an ''enormous tail risk.'' He is so convinced by his arguments that he has warned investors that the fund, called the China Opportunity Master Fund, is prepared to ''burn'' 20 per cent of their cash each year until his theory is proved.

Telegraph, London





Mining keeps money rolling in, but slowdown expected

Peter Martin

November 30, 2010

THE Reserve Bank governor, Glenn Stevens, has hailed the strength of the economy before new figures are published tomorrow that are expected to show that growth has stalled.

Much weaker than expected company profit and sales figures published yesterday led to analysts slashing their forecasts for growth in gross domestic product to close to zero, with some countenancing the possibility of a negative number, the first since the financial crisis.

''All the stars are aligning for a very weak third-quarter result,'' said a JP Morgan economist, Ben Jarman. ''It's not out of the question now that we see negative growth.''
The profits of non-mining companies slid 3.25 per cent in the September quarter while the profits of mining companies grew a further 1.5 per cent on top a 58 per cent rise in the June quarter.

Mining now accounts for $4 in each $10 of profit earned in Australia, and total mining profits in the quarter topped $25 billion, accumulating at the rate of $282 million a day.
Sales were weak in the quarter - the volume of goods sold is down 1 per cent as consumers turned cautious in the face of interest rate rises.

Mr Stevens said the export sector accounted for about one-fifth of the economy. He said that as mining expanded, other parts of the economy and some regions would suffer, at least in relative terms. ''Realistically, we won't be able to hold the economic structure static.

The Reserve Bank had no idea how long Australia's high income would last but it would be wise to use it to boost saving rather than spending.

''Consumption deferred can easily be enjoyed in future; consumption we get used to today is harder to wind back in the future if circumstances change.''


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bridog
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Billt, I just have to balance your alarmist article on China housing with a completely contradictory article, extracts of which appear below:

China's housing bubble myth

Christopher Joye
Published 7:01 AM, 30 Jun 2010 Last update 10:06 AM, 30 Jun 2010

Let’s start with a simple yet fairly fundamental question: has China’s house price growth been unusually strong? China’s National Bureau of Statistics (NBS) publishes a monthly price index for both ‘newly constructed’ and ‘established’ residential homes in 70 medium and large cities. While the ‘newly constructed’ home index recorded 14.2 per cent growth in the year to March 2010, the ‘established’ home index rose by only 9.5 per cent.

Contrary to popular myth, the rise in housing costs across these 70 cities have not been noticeably different to the house price gains registered in Australia (13.1 per cent), the UK (10.7 per cent) and Canada (11.6 per cent) over the same period (see first chart below). Of course, since each of these countries has experienced radically varying economic trajectories over the last year or so, one would expect significant differences in their housing outcomes.

What about over the longer term? Say the last 10 years, which helpfully encompasses the period in which house prices ramped-up most quickly prior to the global financial crisis (GFC). The next two charts show the change in monthly year-on-year house price growth rates across the countries surveyed above.

We can take a few things from this analysis. First, Chinese house price growth underperformed most other nations prior to the GFC. Second, the GFC induced an unusually ‘synchronous’ downturn and subsequent recovery in house price changes across the globe. And finally, the amplitude and timing of the housing correction and rebound in Australia, Canada and China was, for understandable reasons, closely correlated. Australia and Canada are commodity economies with strong trading ties to China. All three countries benefited from banking systems that skated through the crisis mostly unscathed, which meant that they were not subject to the extreme credit rationing that we saw in the US and UK.

The insights above are further confirmed by taking the simple average of the year-on-year growth rates over the last 10 years. Average annualised house price growth in China since January 2000 has been 5.9 per cent, which is less than the growth experienced in Australia (9 per cent), NZ (8.3 per cent), the UK (8.2 per cent), and Canada (6.8 per cent).

With 1.33 billion residents, China is the world’s most populace country (just shaving India at 1.14 billion). Aggregating across 70 cities conceals a lot of cross-sectional diversity. This is no different to the 30 per cent growth rates Perth generated during the mid 2000s while Sydney house prices fell. In a similar fashion, high growth metropolises like Beijing, which with 22 million people is the same size as Australia, have experienced much more rapid house price appreciation than the national aggregates.

Centaline, a leading Chinese real estate agency, measures established house price changes in major cities. And this is presumably the source of the bubble trouble. House prices in the ‘tier-1’ cities – Beijing, Shanghai, Guangzhou, Shenzhen and Tianjin – fell significantly during the GFC. Yet once the worst of the crisis passed, they retraced and then surpassed their previous peaks (see next chart below). In the year to March 2010, established home prices in Beijing and Shanghai have risen by 35 per cent and 38 per cent, respectively. But with just 41 million people (!), these two cities account for merely 3.1 per cent of China’s total population. In numerical terms, that is like comparing house price movements in the Gold Coast with the overall Australian market.

The most sobering characteristics of China’s real estate market are found in its ‘institutional’ features and relative debt ratios. This is where the doomsayers’ claims really unravel.

In China today first time buyers require an extraordinary 30 per cent deposit, which has been raised by the central government from 20 per cent. Downpayments of that size have a huge impact on purchasing power and are about six times more than first timers need in most developed countries. Buyers of a second home are required to have an even larger 50 per cent deposit (it was 40 per cent). And in major cities like Beijing, Qingdao and Shenzhen, where housing supply is particularly tight, the government bans buyers of third time homes having any mortgage debt at all while prohibiting lending to foreigners. In fact, Beijing residents are currently being restricted to one additional home per family.

What about those debt ratios that are cause for so much concern around the world? According to UBS, Chinese household debt as a share of disposable income is just 57 per cent. Mortgage debt-to-disposable income is even lower at 33.5 per cent. Compare this to the US where the equivalent ratios are 124 per cent and 94 per cent. (Australia’s household debt-to-income ratio is over 150 per cent or nearly three times higher than China’s.) Total Chinese household debt as a share of GDP is just 24.4 per cent. In contrast, US and Korean household debt-to-GDP shares are multiples of this at 95 and 86 per cent, respectively.

This is not to say that leverage in China has not risen quickly. It has, but off a very low, non-industrialised base. The following three charts show the time-path of China’s household and mortgage debt-to-household income ratios, and the household debt-to-GDP ratio, compared with the US and Korea since 1990. Long story short: there is nothing here to worry about.

click the image to enlarge


According to UBS, household income in China has also consistently outpaced residential property prices. They deflate the change in two measures of housing costs – the price of newly built homes and implied housing prices based on the sales value and floor size of homes – by official measures of urban income. . . the overall cost of Chinese housing has actually declined since 1999 when deflated by disposable household income.

The complete article including charts can be found at:
http://www.businessspectator.com.au/bs.nsf/Article/property-china-australia-bubb le-pd20100629-6V5V2?opendocument&src=rss


Old enough to know better . . .

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ody
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Chinese real estate

Bridog, it is useful to have this as an antidote. My worry about Joye is that he is dogmatic about real estate the way some bulls are about shares: no argument to the contrary alarms such people. Joye has, I grant, been largely right about the Australian housing market so far. But we do have extraordinarily large mortgages now - far more so than has been at all common, e.g. 7-8 times people's income rather than around 3 times. That does offer a big POTENTIAL danger. The article that Bill posted, moreover, looked at the overall context in China the way Joye does not. And I find it really odd that Joye does not seem to realise how much in China is simply standing empty!! His business specialises in "cranking up" housing in just the same way as many traders of managed share funds do that with shares.
I do not mean, though, that the case "against China" is clear cut - but I certainly think that, in GENERAL terms, for the country as a whole, the risk of overheating is very real. There has never been so much room for speculation there, and there is no doubt that there is a LOT of speculation. But I would not, as yet, be willing to bank on an all-out Chinese catastrophe.


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billt
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Hi Guys

Thanks Bridog for the article, and Ody for your input…

Hart was one of the very few who predicted the Subprime Loan and European Debt crisis and bet against them. This guy has ‘runs on the board’…

Christopher Joye’s article is centered on residential price value – what it doesn’t respond to is the zillions of new residential and commercial buildings sitting empty…at some point these ‘bad loans’ will need to be written off. If construction investment is showing signs of easing – and the massive excess steel capacity is a sign - it will damage prospects for our own growth here very quickly…

The concern is the multi levels of risk within a potential China Bubble and the "inappropriately low interest rates and an artificially suppressed exchange rate" which have created dangerous bubbles in sectors:

- 3.3 billion square meters empty commercial space;
- Residential price-to-rent out of ‘wack’;
- massive excess steel capacity
- bad loans 98 per cent of bank equity
- government debt to GDP @ 107%

Hart suggests elsewhere that government debt to GDP uses "conservative assumptions" and the real figure could be as high as 200%

‘An imminent implosion of China’, perhaps not but equally it puts into some question whether it will be the 'key engine for global growth' going forward…unfortunately we have most of our eggs in that particular basket.


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cat_lady
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DWS -25% ouch!
fortunately not holding personally, but had been thinking about it.
the market is an unforgiving beastie.

cat lady


Without my morning coffee I might as well be a dog

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ody
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Merely another piece of news that will stymie any significant rise on our share market

There is plenty of negative news to keep a lid on our market. The following - from The Australian - will not inspire confidence:
-------------------------------------------------------
AUSTRALIA'S economy is growing at its slowest pace since the global financial crisis, pushing the local currency sharply lower.

The national account figures for the September quarter, published today by the Australian Bureau of Statistics, showed growth of just 0.2 per cent, compared with a jump of 1.1 per cent in the previous quarter.

Today’s gross domestic product data represents the fifth-worst quarterly result in 10 years.

Treasurer Wayne Swan said the GDP report was unsurprising given uncertainty in the world economy, the higher Australian dollar and the easing in federal stimulus.

"There are bumps in the road for our economy but Australia's fundamentals and growth prospects remain strong," Mr Swan told reporters in Canberra.

The pace of growth was well below market expectations for a 0.5 per cent lift. The June-quarter GDP result of 1.2 per cent was also revised down to 1.1 per cent by the ABS.

According to Greg Evans, the Australian Chamber of Commerce and Industry’s director of economics and industry policy, the economy was "delicately poised". Mr Evans warned that a private-sector driven recovery was "struggling to gain traction".

"The Reserve Bank needs to allow time for the recovery to consolidate before it considers further increasing interest rates," he said.

The economy's slow performance prompted a sharp fall in the Australian dollar, on the expectation that interest rates will now be kept on hold well into 2011.

The $A was trading at US96.10 cents before the data was published, and dropped to as low US95.54c after the figures [appeared on] trading screens. By mid-afternoon, the Australian dollar was at US95.57c.

The September-quarter data was the lowest point in the GDP since the December quarter in 2008, when the economy contracted by 1 per cent. At that time, economists had expected Australia would fall into a recession, but the economy recorded only one quarter of contraction.

The Australian economy has been one of the stand-out performers in the world because of trade links to continuing Chinese growth.

Economists are now united in the expectation that the official cash rate will be kept on hold at 4.75 per cent into 2011.

CommSec equities economist Savanth Sebastian said the growth numbers showed that, while mining was performing well, patches of choppiness remained across the domestic economy.

“The data is certainly a wake-up call to those focusing unduly on the mining boom and neglecting the other 90 per cent of the economy,” he said.

“We argued that the cash rate shouldn’t have been lifted in November and this validates our view.

“Unfortunately, the forward looking data suggests that activity is likely to remain stuck in third gear in the near-term.

“Recent economic data has been patchy at best and the inherent conservative attitude by consumers and businesses is likely to take time to change. No doubt the uncertainty in terms of the global economic story will also figure in the mix.”


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ody
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Wall Street up

Not just a chartist's move, but one based on some genuinely good news, with both employment in the private sector and construction up. These are tangible positives. They can't outweigh, or remove, the many problems the US is facing. From a cynical point of view one would have to say there would have to be reason for PANIC if ALL the financial steps at all times led to difficulties only. Some benefit, even if only in a willingness to spend and invest, can of course be expected some time! But in principle that is positive. We'll now have to see whether this is the turning point the market (including global markets) needed, or whether the good news will have a very transient effect only. As yet, the outcome is uncertain. There had been quite a decline in sentiment of late, so if we are to continue to stay in a range, we do need positive days. That's not yet to say that we'll just see rallying from here. Or that we have a major fundamental shift on our hands - but possibly some REAL "green shoots" at last????


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billt
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Hi Ody

It does appear that the stock markets will rally into a wave 5 action over the course of the next few months. XJO looks to have bottomed yesterday.

The rising GDP figures in the US (from 1% to 2% to 2.5%), rising Consumer Confidence, and the first signs of a slowing in the Unemployment figures will give Wall Street the confidence it needs – at least for now.

On the longer term horizon many are predicting the West to maintain GDP growth rates in the 2% to 3% range, whilst the Emerging Economies push higher to 6% over the coming years. Perhaps a softer landing could be still an outcome?

However, the massive Debt & Deficit problems will not go away. Will the ‘austerity’ spending cuts in Europe & USA cut growth to well below trend? Will China continue to boom or will the bubble burst?

US unemployment figures out on Friday – little change in the top line numbers expected. Spare a thought for the 2 million poor souls and their families who are not sure if their unemployment cheques will be stopped this month.



“Although the deadline to file for extended unemployment insurance is officially Nov. 30, many jobless have already filed their last claim for benefits.
And since lawmakers aren't likely to extend the deadline anytime soon, many more unemployed Americans will run out of their extended federal benefits in coming weeks. About 2 million people are expected to stop receiving checks in December.

Though President Obama on Tuesday called on Congress to extend unemployment benefits, lawmakers are still fighting over the expense. Sen. Max Baucus, a Montana Democrat, introduced a bill Monday night that would extend benefits through next year at a cost of $56.4 billion. But Republicans are likely to balk at the price tag.

While they debate, state unemployment agencies are very concerned about the impending end to these extended jobless payments, which they say people depend on to cover their rent and buy food.
"It's a critical safety net program," said Nancy Dunphy, New York State's deputy commissioner of labor for employment security. "This is the worst time of year to be running out of benefits."

Federal jobless payments, which last up to 73 weeks, kick in after the state-funded 26 weeks of coverage expire. These federal benefits are divided into four tiers of emergency unemployment compensation, which last between six and 20 weeks, followed by up to five months of extended benefits. The jobless must apply each time they move into a new tier.”


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market_mad
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Thursday, December 02, 2010 - 06:08 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugene,

How are you mate?

Looks like our bet that the ASX200 will not reach 5500 by the end of the year is going in my favour...

You've got my address - I look forward to a bottle of Dimple just in time for Christmas.

Cheers
MM


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ody
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Thursday, December 02, 2010 - 06:36 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Uncertain markets

Sure, markets did go up during the most recent trading session, on good news from the US - and possibly China. But there are still many negatives which remain unchanged, so it would not take much to bring us another move down. I agree with MM that 5500 for year's end, at least, looks unlikely, unless we get a flurry of good news only. On the other hand, I accept that it is possible that the 2% or so we have seen will not necessarily prove a one-day wonder.


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eblode
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Friday, December 03, 2010 - 10:56 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



To all my friends on IC,
Many thanks for your good wishes.
Yes I'm recovering remarkably after having a 4 kilo cancerous Liposarcoma taken from under my chest. Where the it came from nobody knows but was "feral" and grew like hell within a four month period. In any case it has been removed by two great surgeons, Bill Johnson and Peter Milne. No Chemo or radiation required. I am one hell of a lucky guy! I'm home, walking, and this morning buying and selling. Sold EXS, RKN, IIN and bght RIO,and topped up ABC and AGO. Just unbelievable how this burst of strong markets came in time to lift our sprits before Christmas.
Once again thank you all for your kind thoughts.

Eugenio


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eblode
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Friday, December 03, 2010 - 11:04 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Market Mad,
Boy, you must be an alcoholic as you cannot wait for the end of the year when this bet is properly over.

Eugenio







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ody
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Rally not sure yet - in fact in suspense

For the XJO to rally at all significantly, it must first break conclusively through 4700, which has been its classical kind of level ("point of return") for at least 12 months. It is not yet doing so, though it has, of course, recently moved beyond it. But not only is there now recent bad news in the US unemployment figures, but the market itself was already losing some impetus on Friday anyway (before that US news). Furthermore, even if the index breaks through 4700 conclusively, the road to 4800 will most likely be very hard. And then 4800 would most certainly provide the next major hurdle.

So even if we do see an actual rally, I would question whether it will be worth much - most likely it would be another flash in the pan. Even so, I am keeping an open mind: just expressing scepticism. We have been promised so much by forecasters over the past year - both negative and positive at times - and yet so little has actually happened. Many of the moves up and down would have been quite hard to trade, as well.

One thing that may keep the market on an even keel or even help it upwards is that the downside doesn't look that bad. There seems to be ongoing support at around 4500-4550. I must, admit, too, that I can't see too much reason for Australia to be at a much lower level, though I can certainly think of reasons why it might be FORCED lower, depending on what happens overseas generally, and in China in particular. Also, on just how incompetent our government will prove - especially, how hostile to business. But if nothing truly impact-making happens other than the usual run of news, I would not expect a significant fall.

However, something that should certainly inhibit a significant rise is (a) that many of the companies of which much is expected are actually not cheap, and (b) those that are down are down for good reasons. This means that there aren't actually that many spectacular opportunities. In my view, the market is about correctly priced at around 4700, and most stocks too are reasonably closely priced to where they should be. Some of my favourite stocks - those that actually produce solid earnings of a reliable nature, such As Domino's Pizza (DMP), are trading at quite strong PEs. I can think of 6 or 7 stocks of that nature which are all good, but they are also all RECOGNISED as good. As a bargain-hunter for stocks with strong earnings that the market tends to overlook, I can hardly remember a time, since early 2003, when there were as few stocks in which I clearly saw blue sky as there are at present. I think that investors are pretty savvy at the moment in doing their homework: not missing much, and predominantly, in Australia, cautious. This shows also in their spending patterns and their paying off their mortgages: under those circumstances they are not likely to get wild on stocks. (Residential real estate now has by common consent reached its peak.) Also, for overseas buyers the high AUD, though now weaker, still is a barrier: indeed, its recent "weakness" makes foreigners aware of just how how high our currency has been. The evidence is that, in contrast to Australians, very few overseas investors believe that the AUD can exceed parity, and most see the currency as overvalued.

People may have read, recently, about HUGE prices paid - astronomical ones - for e.g. 18th Chinese vases. This is partly a matter of China trying to buy back what had gone overseas, but since New York buyers are plunging money into Andy Warhol etc, it is clear that much recent art buying is highly speculative. Why??? - Of course because these buyers have very little confidence in anything else: shares, property, currencies, even gold.

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