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Australia Caught in the Headlights |
rffrydr
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 Posted: Fri Aug 10, 2007 6:13 am Post subject: Australia Caught in the Headlights |
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| Quote: |
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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| Posted: Sun Sep 04, 2011 9:52 am Post subject: |
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Feel the imbalance. Can of diet coke in convenience store: $5US; Singapore $1.50.
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rffrydr
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| Posted: Mon May 23, 2011 1:16 pm Post subject: |
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They're throwing $80B back into the ground--that's not Dutch Disease.
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rffrydr
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| Posted: Wed Apr 20, 2011 9:23 am Post subject: |
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Dutch disease, mate:
| Quote: | In outback Australia, “dongas” show costs of mining boom
By Rebekah Kebede
KARRATHA, Australia, April 20 (Reuters) – Demand for Australian commodities is running white-hot. So too are costs in the country’s remote mining towns, to the point where tiny huts or “dongas” can cost as much as a five-star hotel room and backpackers can earn $2,000 a week cleaning them.
Costs are becoming a big headache for Australian miners, including giants Rio Tinto and BHP Billiton , which complain that labour shortages, a strong local currency and rising fuel prices threaten to slow the pace of expansion.
The problem is clearly visible in the remote mining town of Karratha, a gateway to mines in the barren northwest.
“Here the work is very good. You can work 80 hours a week if you want. It’s good money,” said Pic Segolene, a 25-year-old French backpacker who came to Karratha to earn enough cash to fund the rest of her trip around Australia.
Segolene works about 10 hours a day, earning A$25 ($26) an hour to clean houses in this thin slice of suburbia that serves as an Indian Ocean port and a gateway to the endless and bountiful red deserts of Australia’s interior. |
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rffrydr
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| Posted: Mon Feb 28, 2011 4:22 pm Post subject: |
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Yup, those capitalistic markets with chinese characteristics can really get things done:
http://www.economist.com/node/18185742
The aussie buck was no doubt a trigger for this...another mild case of dutch disease. China will prefer its beef in dollars. And, poof, an industry explodes. In a time of food scarcity adds insult to injury. And this isn't crazy economics like Saudis growing their own wheat. Comand economies cut both ways.
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rffrydr
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| Posted: Tue Dec 07, 2010 8:21 am Post subject: |
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Good Times, they don't have to end.
Reserve Bank of Australia
Published: December 7 2010 09:49 | Last updated: December 7 2010 12:05
| Quote: | This time really is different. For most of the last decade, while Australians enjoyed a sustained pay-rise through higher commodity prices, they spent it – and then some. The country’s current account deficit blew out; house prices soared. Now, though, with prices for key exports bubbling up once more, the household saving rate has risen to a tenth of disposable income, up from practically zero between 2000 and 2008. The current account deficit, meanwhile, has retreated to 2 per cent of gross domestic product, from a peak of 7. Housing has begun, at last, to cool.
The Reserve Bank of Australia is assisting this transition as best it can. Governor Glenn Stevens points out with increasing frequency that Australia’s terms of trade – the price of its exports in terms of imports – have rarely been better; a shipload of iron ore that bought 2,200 flatscreen televisions five years ago would buy about 22,000 today. If those terms are to weaken, even temporarily, it makes sense to allow income gains to flow into a higher stock of savings now, to support consumption then. Hence the RBA’s ripple of applause on Tuesday, as it kept interest rates on hold, for a “noticeable increase in the saving rate.” |
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rffrydr
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| Posted: Fri Oct 29, 2010 6:58 am Post subject: |
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Australia's happy place weakened by a strong by a strange case of Dutch Disease:
| Quote: |
Rich deposits of iron ore, coal and other minerals have traditionally been important engines of the economy here. But the current hunger for such commodities, especially in the developing world, is fueling the "biggest mining investment boom since the 1850s Gold Rush" in Australia, as national Treasurer Wayne Swan described it in a speech Oct. 11 before the New York Stock Exchange.
In the process, the raw-materials industry is stealing attention from other sectors and siphoning away skilled labor, bumping wages upward and prompting fears of a skills shortage in other parts of the economy. |
http://www.latimes.com/news/nationworld/world/la-fg-australia-dollar-20101028,0,5663827.story
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rffrydr
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| Posted: Fri Oct 15, 2010 6:52 am Post subject: |
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Parity.
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rffrydr
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rffrydr
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| Posted: Wed Oct 13, 2010 7:28 am Post subject: |
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An embarrassment of riches: Posco cut its 2010 sales forecast to KRW 32.9 trln and reported Q3 net income of KRW 1.04 trln won. A sharp gain in material costs was the main factor creating lower than expected profits.
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diesel
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| Posted: Thu Oct 07, 2010 2:20 pm Post subject: |
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The feeling I get from most people is they think they dodged a bullet but in reality Australia was bulletproof. Large domestic focused fiscal stimulus kept things ticking over and the Chinese stimulus was just gravy on top.
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rffrydr
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| Posted: Thu Oct 07, 2010 6:20 am Post subject: |
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Aussies feelin' bullet-proof...or, like they dodged a bullet?
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diesel
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| Posted: Wed Oct 06, 2010 10:31 pm Post subject: |
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Yeah, I wouldn't be short the Aussie here either and youre not not only one who got the Australian story wrong.  Relatively tight fiscal policy, minerals boom combined with high interest rates should keep the Aussie aloft for now.
Risks are mostly exogenous i.e. a slowing world economy [china] would push the currency back temporarily or double dip for longer [unlikely]. Only other risk I can think of is the pursuit of fiscal surpluses which could turn the real estate market down but thats not an immediate concern. Dollar parity here we come? Maybe after a shakeout first....
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rffrydr
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| Posted: Wed Oct 06, 2010 9:45 pm Post subject: |
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I'm none too proud having scalped a couple cents off the aussie in the greatest market turndown in generations (only with heavy support from a sell-write.) Yup....I pulled the nose off the great-decoupling...only to see snap back into place. I was right...and I was oh-so wrong.
Out of all it. Out of the last ten years. Has there been any country more blessed than this escapee archipelago? Western rule of law and property, balanced population, clean living....Mad Max is but a distant memory.
The measure of Australia's success? The chinese grumbling-turned-outrage over the cost of its precious blood, red iron. I dunno, Diesel, seems like the greatest threat down under is serious case of dutch disease down the line....way down. Wheat is still wheat and coral reef tourism is still tourism. With the breadth of public participation and pushback on outright chinese servitude what to stand in the aussie's way?
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rffrydr
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rffrydr
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| Posted: Thu Jun 24, 2010 8:41 am Post subject: |
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Wow...if that don't defy the trend.
Kevin Rudd
Published: June 24 2010 09:52 | Last updated: June 24 2010 12:31
| Quote: | Most politicians, noted Harold Macmillan, are undone by developments no manifesto or focus group can anticipate. The tragedy of Kevin Rudd, deposed on Thursday as Australian prime minister, was that there were no “events.” The economy barrelled through the global financial crisis, thanks in large part to China’s ferocious appetite for its resources, and an oligopolistic banking system that never had to chase yield in strange places. Then, while politicians elsewhere were squaring up to their banks, Mr Rudd decided to go one better, and take on the miners. By this act of hubris, he becomes a historical curio: the only Australian prime minister to have fought just one election.
Finding ways to slow the exploitation of coal and metals is not, in itself, bad policy. But so bungled was the communication, and so obviously populist the timing – the Labour party, with strongholds of support in regions unblessed by minerals, must hold an election by April – that Mr Rudd’s credibility never recovered. Having described the industry’s threats of pulling investments as “balderdash” and “bunkum,” he was wrong-footed when they did so. Spending A$39m on an advertising blitz might have been justifiable, had the prime minister not effectively outlawed the practice two years earlier, describing tax-funded ads as “a
cancer on democracy.” |
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