The new year’s worldwide economic downturn has an interlocking effect: every national economy is searching to accommodate itself politically as well as economically to what looks to be an extended period of low growth. After longer or shorter periods of historically unrivaled prosperity, they are feeling for a “bottom” – a level to wait out new growth. That is the proverbial “soft landing”.
While we’re not bubbling over with optimism, we believe the New Year will be anything but boring.
Australia's MAp Group has agreed to swap airport stakes with Ontario Teachers' Pension Plan to beef up its holding in Sydney Airport...
As East Australia Prepares For Cyclone Yasi Flooding, West Suffers From Drought...And A Weak Wheat HarvestSubmitted by Tyler Durden on 02/02/2011 10:20 -0400
AUD pairs (and the ES, as a result) are not doing too hot today: the primary reason - Cyclone Yasi, which is now projected to be a category 5 storm according to the Australian Weather Bureau, is making landfall in Queensland and will add to the continent's flooding misery, which has already incurred over $20 billion of damages to eastern states. Yet in a case of supreme irony, the West of the continent, unlike the East which has been having flood after flood, and which is the source of Australia's bread basket and where the bulk of the grains come from, is wrapped in a drought that threatens to impair an already week wheat harvest. From Bloomberg: "At stake is the output of the country’s biggest wheat- growing state at a time when global food shortages have pushed prices to records. The drought has already prompted the government of Western Australian state Premier Colin Barnett to cut its economic growth forecast for the year to June 30 to 4 percent, from 4.5 percent."
In his weekly headline letter John Taylor analyzes where he and Jim Chanos have overlapping views, and where both of them erred (hint: everyone underestimated the willingness of Bernanke to sacrifice monetary prudence in order to reflate anything and everything, although with oil now the latest and greatest excess liquidity target, the experiment may soon be ending). Yet the time of the global reliquification may be coming to an end: "If the Republicans play rough and California craters, fiscal tightening will be the rule, US rates will be higher than Bernanke wants, the dollar will be strong, and foreign markets will be hurt. The odds favor an outcome like this, and the Fed is not free to ride to the rescue again. With Ron Paul riding hard over Bernanke, the Feds wild ways will be corralled. With fewer excess dollars, the growth game, and the markets that follow it, are over." So is shorting stocks the best bet? Yes. But an even better one is going short the Aussies: "The Aussie was over USD 1.0000 today and we think it is a great sell here."
As a follow-up to our piece on the Australian macro outlook (Australia: The Land Down Under(water in mortgage debt), We looked into the four largest Australian banks...
From the lawsuit: "Goldman intentionally failed to provide correct information regarding the state of the market in Timberwolf and/or intentionally failed to provide correct information concerning Goldman's actual opinion concerning the state of the market for the Timberwolf security and its quality and value. At the time Goldman made these statements to BYAFM, Goldman was actively shorting both Timberwolf and comparable securities because Goldman's internal assessment of the market for such securities was that their value would drop. In order to reduce Goldman's exposure to CDOs, Goldman personnel made false and misleading statements of material fact, knowing such statements were false and misleading... and with knowledge that BYAFM would rely on them in making the decision to purchase an interest in Timberwolf. Moreover, Goldman personnel failed to disclose material information knowing that, by this omission, information that they did disclose was rendered misleading, or they acted with reckless disregard as to whether the omission of the information rendered other disclosures misleading."
How the fear of bubble busting at home and in China leads to protectionism, which will ultimately lead to... bubble busting.
Once again massive corporate behemoths show those bankrupt sovereigns who is in charge. Case in point China's great resource subsidiary-cum-housing bubble known as Australia. The Australian reports that a mere three weeks after the Rudd unveiled its new resource super tax, the government will back track on this proposal, and will "lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies." Not to look completely toothless, the government will still keep some vestige of the tax, although now that corporations know they have the upper hand, look for this tax proposal to be soon eliminated completely. In fact, mining companies have already declared the changes do nothing to stop the risk to investment in Australia. Quite possibly one of the main reasons for this capitulation has been the huge drop in the AUD over the past several weeks, as investors have unwound long AUD trades with gusto. In the meantime, the slow, concerted creep by corporations to take over the world continues. Next step: the IBM Stellar Sphere, the Microsoft Galaxy, Planet Starbucks.
We already know that the Federal Reserve System was blind, mute, dumb, and frankly, retarded when it came to Lehman's Repo 105, and pretty much every other aspect of the Lehman collapse. As the Examiner discloses: "Secretary Geithner “did not recall being aware of” Lehman’s Repo 105 program", "Jan Voigts, who was an Examining Officer in FRBNY’s Bank Supervision Department, had no knowledge of Lehman removing assets from its balance sheet at or near quarter?end via a repo trade", "Arthur Angulo, who was a Senior Vice President in FRBNY’s Bank Supervision department, likewise was unaware that Lehman engaged in repo transactions at quarter?end" although the latter did point out that "the described repo transactions appeared to go “beyond other types of [permissible] balance sheet management.” And lastly, "Thomas Baxter, FRBNY General Counsel, had no knowledge of Repo 105 transactions, either by name or design." Yet it is these clowns that want to become America's uber-regulator. Now that is funny, considering that at the apex of the greatest cataclysm for the financial industry, the Fed was blissfully unaware of one of the most egregious book cooking scams ever conducted by a Wall Street firm. Yet with all the Fed's bells and whistles, with all its Bloomberg terminals, all its fancy daytraders, all its Flash trading enabled momentum chasing algos, one central bank, half way around the world, knew all too well what was going on at Lehman - the Reserve Bank of Australia. Which is why we nominate the RBA's chair, Glenn Stevens, to be direct supervisor of the entire ungodly and corrupt mess that is Wall Street (and to make Ben Bernanke his butler). We also strongly endorse the nomination of Amanda Drury to supersede that of Janet Yellen, as the Fed's new chair of vice. At least she will bring some inflationary pressures to the Marriner Eccles building.
Remarks By Bill Dudley At Australia Dodecatuple Secret Banker Meeting: Where We Have Been, Where We Are And Where We Need To GoSubmitted by Tyler Durden on 02/08/2010 20:51 -0400
"With respect to financial market infrastructures, the Federal Reserve is working with a broad range of private-sector participants, including dealers, clearing banks and tri-party repo investors to dramatically reduce the structural instability of the tri-party repo system." - Oh, so it is structurally unstable. All this, and many more remarks of the "I say X, but really mean Y" variety in the attached speech.
The earlier announcement of a 25 bps rate hike by the RBA was not a big surprise. What was, however, was the knee-jerk reaction by both the USD and the JPY, and specifically the relative sizes of said jerk. As both currencies are funding currencies to AUD longs, the relative reactions provide a good, if crude, way to quantify the relative concentration of shorts in any givencurrencies (USD and JPY). Then again, it may merely indicate that tonight's USD-trading night shift at Goldman had much more Red Bull than the OZ one. In either way, both the initial knee jerk reaction as well as the subsequent follow through, indicate a roughly 50-100% greater concentration of dollar than yen-based shorts: in other words: the carry ratio funded in USD and JPY is between 2:1 and 3:2.
A just issued update publication by ABARE on Australian Commodities (June 2009), in the section summarizing projected 2009-2010 economic activity, ABARE provides a -0.5% estimate for economic decline.