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Australia Caught in the Headlights
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Author Australia Caught in the Headlights
rffrydr
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PostPosted: Fri Aug 10, 2007 6:13 am    Post subject: Australia Caught in the Headlights Reply with quote
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Aussie punters are as ignorant of bear markets as the first explorers were of monotremes. All local equities do is go up. This has created an investment environment as unique as the platypus, the country's famous egg-laying mammal. But the All Ordinaries index is now suffering the same panic selling that has gripped markets round the world, and is 7 per cent off its July high. Last week's news that two Macquarie Bank funds faced significant subprime-related losses has not helped. How might Australia's bullish investors cope with a more prolonged slump?

Things could turn ugly. Much of the market's recent strength is due to an expansion of valuation multiples - earnings growth has lagged annual index gains by about 10 percentage points over the past four years. Some of the demand has been created by Australia's compulsory pension scheme that pours an additional ADollars 20bn-ADollars 30bn into domestic equities every year. These assets now account for two-thirds of the market's ADollars 1,590bn capitalisation. But new and existing funds could quickly shift to bonds or even cash. And a global downturn would hit financial and resource stocks hard. These two sectors account for 60 per cent of the index.

Falling share prices might eventually lead to a wider range of popular investment products. Unlike continental Europe, few structured funds are offered in Australia. Most investors would laugh at the idea of paying for capital protection. The same goes for hedge funds. Why pay expensive management fees when cheap index trackers return more than 20 per cent per year? The demand for diversification will also increase if the domestic market continues to struggle. Institutional fund managers are already building up their international teams in anticipation of higher overseas weightings.

But it is Australia's real economy that could be hit hardest. With the broadest equity ownership in the world, consumption is as linked to shares as it is to house prices.



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rffrydr
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PostPosted: Tue Feb 12, 2008 8:33 am    Post subject: Reply with quote
Aussie exports getting nervous:

http://www.bloomberg.com/apps/news?pid=20601081&sid=aN2k8KuWEkjI&refer=australia
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rffrydr
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PostPosted: Tue Feb 12, 2008 12:25 am    Post subject: Reply with quote
The beauty of this crunch is it keeps on crunching:

http://registration.ft.com/registration/barrier?location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F6929508a-d90d-11dc-8b22-0000779fd2ac.html&referer=http%3A%2F%2Fftalphaville.ft.com%2F
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rffrydr
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PostPosted: Tue Feb 05, 2008 10:22 pm    Post subject: Reply with quote
BHP, the world's largest mining company, fell 8.3 percent to A$36.38, the most since Oct. 23, 1987. The company reported a 2.4 percent decline in first-half net income, its first profit drop in more than five years, as production costs soared.
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diesel
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PostPosted: Sun Feb 03, 2008 9:46 pm    Post subject: Reply with quote
Hi Henry,

I agree we could see some more weakness in the Dollar. I think we could see 1.55 on the Euro and 0.93 and 0.81 on the Aussie and NZD respectively. If we reach these targets I will increase my positions.

As for the Japs I picked up some NMR for around $13.40 and bought some JOF between $8.10 and $8.60. They are both doing well. Cool Also will probably close out the last of the Sp500 futures I bought back at 1290 soon to keep leverage down.

Thanks.
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HenryTo
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PostPosted: Sun Feb 03, 2008 8:38 pm    Post subject: Reply with quote
Diesel,

I think your bullish view on the U.S. Dollar (against Euro, Pound, AUD, CAD, etc) is sound for 2008 - although I am still looking for continued weakness going into the March 18th Fed meeting. By the way, did you get a chance to buy some Japanese equities last week? Cool

Best regards,

Henry
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diesel
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PostPosted: Sun Feb 03, 2008 8:19 pm    Post subject: Reply with quote
Yep, thats why I have moved most of my liquid net worth out of Australia and NZ. The rest in fully hedged. The problem is where is a safe place to park capital in this market? Lets hope MT has it right again..
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HenryTo
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PostPosted: Sun Feb 03, 2008 7:54 pm    Post subject: Reply with quote
So much for the concept of "decoupling." Australian mortgages now getting downgraded on the heels of the troubles in the U.S. mortgage industry. When commodity prices start heading down, these economies could easily come crashing down:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aiAE.vEzV_aY&refer=home

Quote:
Moody's Investors Service may cut the ratings on about 45 percent of Australia's mortgage-backed bonds because of concerns the U.S. housing slump may make it harder for the insurer of the home loans to pay claims.

Moody's is reviewing A$83 billion ($75 billion) of mortgage- backed bonds because they are linked to loans insured by PMI Mortgage Insurance Ltd., the company said today in a statement. Australia has about A$180 billion of such bonds, of which Moody's rates A$120 billion, said Henry Charpentier, structured finance analyst at Moody's in Sydney.

PMI Mortgage Insurance is the local unit of Walnut Creek, California-based PMI Group Inc., the second-largest U.S. mortgage insurer. PMI may lose its A1 score, the fifth-highest investment grade, Moody's said Jan. 31, citing ``increased loss expectations for U.S. residential mortgages.''
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HenryTo
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PostPosted: Thu Jan 31, 2008 7:56 pm    Post subject: Reply with quote
Australian manufacturing sector shrinks for the first time in two years. In the meantime, the Reserve Bank of Australia is contemplating of raising rates. We are going to be in a global slowdown, all right:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aR9yhfmd9Yp4&refer=home
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rffrydr
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PostPosted: Wed Jan 30, 2008 1:16 am    Post subject: Reply with quote
Built on financial trepidation! All extremes become their opposite. This Macquarie Group CEO and his carnival barking has really shaken my image of those rugged individualists down under. Great series.
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PostPosted: Tue Jan 29, 2008 2:06 pm    Post subject: A yarn as big as Australia: Anatomy of a Housing Bubble Reply with quote
A lengthy but infomative read on the financial situation 'down under' by John Needham.

It is in 2 parts with a 3rd instalment in the offing.

Part 1: http://www.financialsense.com/fsu/editorials/danielcode/2008/0116.html

Part 2: http://www.financialsense.com/fsu/editorials/danielcode/2008/0129.html

DK
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rffrydr
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PostPosted: Mon Jan 21, 2008 6:36 pm    Post subject: Reply with quote
One of our big aussie infrastructure plays down 40%:

http://www.cnbc.com/id/15840232?video=626403746&play=1
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PostPosted: Fri Jan 04, 2008 8:30 am    Post subject: Reply with quote
Rates go up without rates moving. It's only property--but property is Australia's new game.


http://www.bloomberg.com/apps/news?pid=20601087&sid=aysKVTO8i66o&refer=home
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PostPosted: Tue Dec 18, 2007 12:38 am    Post subject: Reply with quote
Notice who bought this:

http://news.yahoo.com/s/afp/20071216/od_afp/canadainternetdrugchristmasoffbeat
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PostPosted: Wed Dec 12, 2007 10:45 am    Post subject: Reply with quote
While the Aussies are starting to "identify" with asia via ETFs:

http://www.financialstandard.com.au/index.php?id=11530
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PostPosted: Thu Dec 06, 2007 10:27 am    Post subject: Reply with quote
The New Zealand bond market yields rising, looking very attractive, the benchmark interest rate at a record-high of 8.25 percent, Bloomberg writes Dec 6 as follows
http://www.bloomberg.com/apps/news?pid=20601081&sid=aIPEpRKICybQ&refer=australia
Maybe a place to park some cash?
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