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  • Thank god someone’s worried! : third wave group
    Bank meets tomorrow and is expected to keep official interest rates on hold following a week in which political instability in North Africa and the Middle East has pushed oil to more than US100 98 a barrel An internationally renowned macroeconomist at the Australian National University Professor McKibbin has been a Reserve Bank board member since 2001 He is not expected to be reappointed by Wayne Swan when his second term ends in July following his criticisms of Labor s budget stimulus spending and now its flood levy Yet if it proves correct Professor McKibbin s warning would pose a dilemma for the Reserve Bank over whether to jack up interest rates in response to global inflation pressures just as our export prices start to fall Professor McKibbin said the bursting of the new global bubble would severely test the Gillard government s budget settings and its reregulation of the job market We have not tested these changes that have come under the Rudd Gillard era he said We are about to His analysis suggests much of the surge in mining energy and food prices is being driven by the near zero official interest rates and so called quantitative easing of credit conditions in the US and Europe in the wake of the GFC The Reserve Bank s commodity price index has jumped 49 per cent in the past year that includes a recent 9 per cent jump driven by a surge in food prices Reserve Bank governor Glenn Stevens last week noted strong demand from China and India had fuelled the surge in Australia s terms of trade the ratio of the prices we get for exports compared to the prices we pay for imports to their highest sustained level for at least 140 years This was producing the biggest mining development boom in a century But Professor McKibbin suggested that perhaps 40 per cent of this terms of trade surge was being driven by US and European monetary expansion which is feeding generalised inflation pressures That is why inflation is taking off all over the world he told The Australian It is already out of the bag As interest rates go up a whole bunch of assets and balance sheets will get crunched so I am not optimistic Professor McKibben said Australia should have been generating budget surpluses to direct into a sovereign wealth fund as the terms of trade has surged to record highs And should have been deregulating the job market to help the economy digest the looming terms of trade reversal Category general posts Tags australia global financial crisis michael stutchbury warwick mckibbin Comments 5 Responses to Thank god someone s worried China Story says March 8 2011 at 9 41 am Tracey I have to disagree with you on both your view and the slant of the article You have to be very careful listening to economists because they make the worst investors and I can guarantee you not many of them retire early

    Original URL path: http://www.thirdwavegroup.com.au/general/thank-god-someones-worried/ (2013-02-03)
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  • Property shortage hype? : third wave group
    dwellings across the nation and that urgent action is needed by governments to make it easier for builders to bring product to the market I believe the alleged shortage is a myth and that the claims of developer lobby groups should be challenged There s certainly no shortage on the Gold Coast not of apartments nor of houses and land The newly published Prodap Report also by Morris says vacant land sales on the Gold Coast in the December quarter were the lowest since 1994 Developers periodically complain about a shortage of land on the Gold Coast but the Prodap Report says the current supply of vacant lots equates to 13 months supply at current take up rates It s a similar story with new house and land packages Further significant land development in the immediate future could easily lead to oversupply Morris says Indications from developers are that land production over the next 12 months will reach 2455 lots twice the current level of annual demand Remember that next time you hear the Housing Industry Association or the Master Builders Association complaining about the lack of land sales or new house sales Western Australia has the strongest economy in the nation but Perth has the weakest property market among the state and territory capitals Both the Australian Bureau of Statistics and the RP Data Rismark Hedonic Home Value Index found slight declines in values in Perth last year The key reason for an under performing property market amid an economic boom is a surplus of product for sale The number of dwellings for sale is at its highest levels since early 2009 At the same time there s a lack of demand particularly for land Land sales dropped 27 per cent in Perth in the December quarter while average prices fell 3 per cent Such things do not occur amid a chronic housing shortage crisis There s certainly no shortage in Adelaide where vast areas are being opened up for new development in the north of the city The Land Management Corporation announced early this month the release of land at Blakeview which will allow developers to build more than 3000 homes This is in addition to the 400ha rezoned by the state government to allow Delfin Lend Lease and others to develop 3900 homes at Gawler East and the 2800 homes to be built in the 4 billion Waterview suburb to be created on 357ha Developers in Melbourne complain bitterly and often about shortages despite the vote in Victoria s parliament last year to increase Melbourne by 43 000ha on the city s western northern and southeastern fringes The expansion is the biggest change to the size of Melbourne in almost a decade and will accommodate 134 000 homes providing 20 years of land supply for new housing At the same time Melbourne s residential vacancy rate is approaching 4 per cent according to sqmresearch Here as elsewhere across Australia the chronic housing shortage crisis is a myth

    Original URL path: http://www.thirdwavegroup.com.au/general/property-shortage-hype/ (2013-02-03)
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  • A Tale of Two Housing Markets : third wave group
    where he looks at the differences between the UK and German housing markets As the Unconventional Economist column correctly pointed out The no housing bubble myth can t last January 28 unresponsive housing supply results in greater house price volatility both on the way up and the way down This sounds technical but the experience of two other countries housing markets provides a good illustration of the phenomenon The countries in question are the United Kingdom and Germany On the one hand they are remarkably similar Over the past forty years both the UK and Germany experienced similar population growth almost identical decreases in household sizes and comparable economic growth Besides both countries have similar population densities Summing it up the UK and Germany share all the factors that explain housing demand As is so often the case the Brits and their Teutonic cousins are more similar than the Germans think and the British wish to believe However as comparable as they are with regard to housing demand they are wildly different in terms of housing supply For a variety of reasons housing supply was extremely rigid and limited in Britain and extremely flexible and responsive in Germany The Germans built more houses than the British both in per capita and absolute terms The EU collects data for the housing markets of its 27 member states According to their statistics Germany s rate of dwellings completions per 1 000 inhabitants was consistently higher than the UK s In some years the difference was only 10 per cent in others more than 110 per cent The differences in completions were also reflected in the land made available for development The Cologne Institute for Economic Research calculated that last year there were 50 newly developed hectares of land per 100 000 population in Germany but only 15 hectares in the UK So what did these different housing supply circumstances mean for British and German house prices over time Adjusted for inflation British house prices rose steeply in the early 1970s and then fell almost as much German house prices were flat Then British house prices peaked again in the late 1970s only to fall slightly again German house prices were flat After that British house prices rallied until the late 1980s while German house prices remained flat Following a massive housing bust in Britain that ended in the mid 1990s British house prices went on another long rally that ended in 2008 All the while German house prices stayed flat Now British house prices have suffered another heavy correction and surprise surprise German house prices are still flat Looking back over the housing markets of both countries British house prices are now considerably higher than they were 40 years ago whereas German house prices have hardly shifted at all In the long run the supply constraints obviously reduced housing affordability in Britain It is just what economic theory would have predicted But the history of British and German house prices also shows

    Original URL path: http://www.thirdwavegroup.com.au/general/a-tale-of-two-housing-markets/ (2013-02-03)
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  • China still worries investors : third wave group
    Vitaliy Katsenelson The Chinese government is extremely concerned about the economy slowing down because that is likely to lead to political unrest A lot of that potential friction comes because a lot of people moved from villages to the cities China has an almost non existent social safety net system So people who lose jobs don t complain they riot We have spoken before of the China bubble and the fact that a number of hedge funds have been placing significant short positions on China in other words looking to profit from China going bust The most renowned is Jim Chanos who famously shorted US giant Enron before its dramatic collapse His reasons for doubting the China story are quite simple the numbers don t stack up In a recent article in Fortune Chanos and China the genesis of Chanos China short is explained One day at a research conference in 2009 Chanos listened to an analyst tick off numbers about the scale of China s building boom He said they were building 5 billion square meters of new residential and office space 2 6 billion square meters in new office space alone I said to him You must have the decimal point in the wrong place He said no the numbers are right So do the math That s almost 30 billion square feet of new construction There are 1 3 billion people in China In terms of new office space alone that amounts to about a five by five foot cubicle for every man woman and child in the country That s when it dawned on me that China was embarking on something unprecedented An increasing number of hedge funds are coming round to Jim Chanos way of thinking Mark Hart of Corriente Advisors an American hedge fund made significant returns with his prediction of both the subprime crisis and the European sovereign debt crisis He has now turned his attention to China and believes that rather than being the key engine for global growth China is an enormous tail risk The most recent research by Corriente Advisors echoes the China concerns of Jim Chanos and confirms the still astonishing over supply present in the country Cement production is one example where China has consumed just 65 per cent of the cement it has produced in five years and that is after taking into account exports Steel production is another obvious area of concern with China outputting more steel than the world s next seven largest producers combined and has 200m tons of excess capacity Construction is the most outlandish example of all with an excess of 3 3bn square metres of floor space in China and yet 200m square metres of new space is still being constructed each year If China is worried about civil unrest the imbalances their current policies are creating are not helping Category general posts Tags china jim chanos mark hart vitaliy katsenelson Comments One Response to China still worries investors Treeman says

    Original URL path: http://www.thirdwavegroup.com.au/general/china-still-worries-investors/ (2013-02-03)
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  • Insider Boycott : third wave group
    for any number of reasons though they typically buy only because they believe their stock will rise Sorting the wheat from the chaff in terms of thousands of transactions takes a lot of legwork and we at sentimenTrader prefer to look to those with a particular kind of expertise for this analysis The basic premise however is that when insiders are selling much more stock than they are buying they are feeling pessimistic and more often than not it precedes weakness in equities Conversely when insiders are busy buying stock they are optimistic and we should be looking for a market rally So with that background the latest corporate insider activity is rather startling According to Bloomberg in the week ended January 14 S P 500 insiders sold 163 million worth of stock in 54 separate transactions They bought exactly 0 That s right in the last week there was no insider purchasing This is the first time in years and possibly for ever in which we have seen a week during which there was not one purchase by an insider Surely there is no need to comment on this result Category general posts Tags insider activity sentiment technical analysis Leave A Comment Click here to cancel reply Name required Mail will not be published required Website subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation

    Original URL path: http://www.thirdwavegroup.com.au/general/insider-boycott/ (2013-02-03)
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  • Brisbane: what next? : third wave group
    thousands of people just like this So the pursuit of the great Australian dream will become a nightmare for many People bid up prices banks happily lend money and people are now financially ruined An interesting debate that is yet to play out fully is the role of the Wivenhoe Dam and the management of its water release Hedley Thomas National Chief Correspondent for The Australian asks how much did releasing huge volumes of water contribute to the catastrophe A common refrain after a natural disaster is that it is easy to be wise in hindsight and that Wivenhoe Dam s operators performed an exceptional job under extraordinary circumstances to ensure the dam minimised the flooding This might be correct The alternative and gravely serious scenario is that Wivenhoe Dam s operators conditioned by years of El Nino linked drought that had reduced dam volumes to perilously low levels enveloped political masters in crisis and ushered in severe water restrictions were determined in the latter months of 2010 to store more water in the dam than necessary Under this scenario the operators of the dam did not err on the side of caution did not adequately heed the serious and repeated warnings of extreme weather did not have sufficient buffer for the major rainfall event that occurred and were compelled in a crisis situation to release thousands of megalitres quickly turning what would have been a moderate flood in Brisbane into a natural disaster The effect of the flood on housing prices in the Brisbane area is difficult to forecast David Llewellyn Smith notes that in the year following Hurricane Katrina New Orleans house prices rocketed 27 per cent over a period of months due to it is believed displaced residents bidding up median prices Is this a scenario Brisbane can expect This blogger thinks it unlikely that we will see such a dramatic price escalation in Brisbane The floods are not as serious nor as persistent as those that afflicted New Orleans The clean up will be more swift too Another major difference is that this event is associated with a 20 30 year major La Nina It is a climate system that is well understood and not indicative of a frequent danger New Orleans on the other hand had been dodging hurricanes for years and there remains a very real prospect of another any given year So we can expect less damage and less displacement Looking at the house prices after Brisbane s 1974 flood provides some support for the view that prices are unlikely to deviate much from the general market Nonetheless in the short term we might still expect flood inspired sales and movement And in that sense there may be a pick up in housing turnover and perhaps price shifts accordingly Following the Brisbane floods of 1974 5 the median price in the city did jump 19 according to this Macquarie University paper This was well ahead of Sydney at 8 Melbourne at 12 5

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/brisbane-what-next/ (2013-02-03)
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  • Can we learn from Ireland? : third wave group
    has also posted a fabulous documentary of what went wrong in Ireland in spite of the warnings Is it inevitable we do the same Does anyone care And to complete your Christmas reading Australia has again attracted the attention of one of our favourite economic commentators Mike Shedlock a reminder of how tenuous is our bullet proof economy Category general posts Tags leith van onselen mike shedlock real estate Comments One Response to Can we learn from Ireland Matt says January 1 2011 at 2 33 pm This article is actually informative http christopherjoye blogspot com 2010 12 australian housing markets valuation html Reply Leave A Comment Click here to cancel reply Name required Mail will not be published required Website subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china

    Original URL path: http://www.thirdwavegroup.com.au/general/can-we-learn-from-ireland/ (2013-02-03)
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  • Tidal Report – China, nothing to see here : third wave group
    the past we ve been clearly focusing on administrative measures Going forward we could be using more price adjustments via interest rates he said adding that he expected five rate increases by the end of next year and from Bloomberg News also thanks to Global Economic Analysis The southwestern Chinese city of Kunming where Wal Mart Stores Inc and Carrefour SA have operations has imposed temporary price ceilings on daily necessities to counter inflation Kunming s government asked five retailers three non Chinese one Chinese and one based in Hong Kong to report any price adjustments and give reasons for the changes two days in advance of making any alterations the National Development and Reform Commission s local branch said on its website yesterday Besides the five companies other food cooking oil and beverage producers are requested to apply for government approval 10 working days before making price changes the statement said The city government also imposed temporary price ceilings on daily necessities in major parts of the city starting from yesterday to the end of February according to the statement Prices of grain cooking oil meat eggs milk and noodles are to be kept at levels before Nov 17 the statement said The city limited retail prices of vegetables depending on type to 40 percent to 100 percent higher than wholesale prices the statement said The Chinese government is attempting a fine balancing act based on the crucial assumption that a bureaucracy can control an economy of 1 3 billion people an assumption with a less than stellar track record All of which leads to a fascinating must read article in Fortune Chanos and China We have discussed Jim Chanos and his views on China before here and here describing him thus That famous investor is James Chanos the founder of Kynikos Greek for cynic an investment firm specialising in short selling i e profiting when prices fall He famously shorted US energy giant Enron just before its spectacular collapse A Politico article this week discusses his famous call in 2001 when Chanos figured out that Enron s accounting numbers were pure fiction and began contacting Wall Street investment houses that were touting Enron s stock Chanos told a congressional committee in 2002 that we were struck by how many of them conceded that there was no way to analyse Enron but that investing in Enron was instead a trust me story In a move that parallels his Enron call China has caught Chanos attention which he views as another trust me story and that much of the China miracle is in fact accounting nonsense He is said to be extremely influenced by the Pivot Capital report While not the first investor to query the veracity of official Chinese economic statistics Chanos is certainly the first to say that he is moving to short the entire nation s economy In the Fortune article based on an interview of Chanos by Bill Powell the genesis of Chanos China short is

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/china-nothing-to-see-here/ (2013-02-03)
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