Australian Bear Raid

“I shall try to show that freely floating exchange rates are inherently unstable: Moreover, the instability is cumulative so that the eventual breakdown of a freely floating exchange rate system is virtually assured.” George Soros-








I will focus this thread to two currencies I perceive to be inherently unstable. Firstly, the United States Dollar and The Australian Dollar. I believe the masses can agree about the first currency but are still reserved on the latter as it has outperformed all other major currencies over the last 20 years. However, through my own real time experiment I will ONLY SHORT US DOLLAR AND AUSTRALIAN DOLLARS through swing plays and once the AUD Euphoric bubble has come to a head I will short everything across the board from

 

1. Bonds
2. Interest Rates
3. AUD Equities /options
4. Australian Dollar Futures
5. Spot Crosses

At the moment Australian dollar is the poster child for the market and foreign capital flows but I will offer the following in this thread.

1. Everything news related to Australian economy. Some will be news that is freely floated around the internet, the other will be from former colleagues who I used to work with in my former suit and tie life.
2. Australian Company (Materials,Banking, Construction, Energy) earnings, assets acquisitions/sales, expansion/contraction in projects, conference call speeches of interest
3. Government Economic reports W/ sector number of Contraction/Growth.
4. Banking Loan portfolios and their sheets (Mortgage repayments schedules, L/V ratios)
5. Housing, Credit, emigration
6. Bond Market and Net foreign Inflows/outflows
7. Government Books and futures projects

This thread will be directed to fundamental data and developments in Australia (less so in US) so anything related to technical analysis will be directed to AUD/USD active forum. I agree at the moment that Australia is still a poster child and that the crash is not here but that does not mean you cant make money shorting in the mean time for swing plays before the 'big one' occurs.


>>>>>>I will post my live trades as soon as they are put on and taken off
>>>>>> I will post balances of trades taken and keep track of the progress in real time
>>>>>>I do believe middle of next year or q1/q2 2013 WE will see a contraction in Australia and see rates come down but until that moment I will be unbiased and post for longs and shorts who may choose to follow both positive and negative news,numbers, updates that come out of AU
>>>>>> I welcome those who are long or short to post their views on the Australian economy so that debate can be healthy and more minds can chime in on views of direction looking forward.












EDIT::: NEW STRUCTURE OF THE THREAD STARTING 9/25/12

PST
The Thread will cover everything related to AUD.

Monday Throughout the day posting’s of Tweets, news post, AUD S/R levels (once or twice only)
Tentative- Econ releases basic numbers and a couple sentences
11pmPST- Sydney market Close; Equity earning or stocks of note

Tuesday throughout the day postings of Tweets, news post, AUD S/R levels (once or twice only)
Tentative- Econ releases basic numbers and a couple sentences
11pmPST- Sydney market Close; Equity earning or stocks of note

Wednesday throughout the day postings of Tweets, news post, AUD S/R levels (once or twice only)
Tentative- Econ releases basic numbers and a couple sentences
11pmPST- Sydney market Close; Equity earning or stocks of note

Thursday Throughout the day posting’s of Tweets, news post, AUD S/R levels (once or twice only)
Tentative- Econ releases basic numbers and a couple sentences
11pmPST- Sydney market Close; Equity earning or stocks of note

Friday- 2pmPST Market close week in review; personal trading statement for the week
5pmPST Australian Excel sheets of Econ reports for the week (updated), COT positioning Graph (updated)
Saturday- Free write or food for thought article
Sunday- 12pmPST bullet points of previous week from news, markets, and upcoming week events

Below is the report that I have been working on for the last couple weeks and had numerous people contribute to it from a dear friend who works at one of the BIG 4 to a University student who edited and formatted it because I was never great at English Composition 101. This is not a bear argument nor a bull argument it is just the current state of affairs and what is going to either crash or grow the economy of Australia.










The recent decline in spot iron ore prices is large by historical standards. At less than USD90/tone last week, the spot iron ore price has fallen over 30% since June and is well below what had been considered its floor price of around USD120/tone. The house view is that iron ore prices will rebound by early 2013 in line with a policy-led recovery in Chinese growth.
The risk to this view, though, is that iron ore prices remain below the USD120/tone marginal cost of Chinese production. The risk is exacerbated by the sluggish Chinese policy response to date, although the market expects a more aggressive policy response once the Chinese leadership transition occurs over the next month or two.
Should the recent decline in iron ore prices and the Australian terms of trade be sustained, this would see weaker nominal GDP growth, weaker company profits, deterioration in federal and state budget positions and increasing financing challenges and delays for some mining projects under consideration. This effect is primarily beyond 2013 at this stage with major LNG projects dominating the pipeline before that time.
The longer iron ore prices remain weak and the AUD remains strong, the less comfortable the RBA will likely be with the currency’s level, the greater the pressures for structural adjustment and the stronger will be the bias for more accommodated monetary policy.


Given these risks and continuing declines in job advertising, I am forecasting 50bps of official interest rate reductions by early 2013 as the RBA will be required to further boost the interest-rate-sensitive sectors of the economy. Beyond this time, the bias of rates still remains to the downside. I see continuing bond inflows to mute the AUD’s normal balancing effect on the economy: absent this effect, the risks on the AUD would increasingly be to the downside.


Two weeks ago the spot iron ore price in China has dropped to below USD90/tone for the first time since late 2009 (i.e. since the aftermath of the GFC). The floor price of USD120/tone assumed by many analysts, which is the marginal cost of Chinese production. The price has declined by USD48/tone (or 35%) since end June and is less than half its peak of USD205/tone in March 2008. These price falls reflect the drops seen in Chinese domestic steel prices, which have been brought about by weaker public sector investment and policies designed to cool a housing market that was overheating following GFC-related policy stimulus.


With the AUD/USD remaining high rather than declining alongside Australia’s key bulk commodities prices, price developments in USD terms have flowed through full to AUD prices (squeezing the margins of Australian iron ore producers sharply). At around AUD87/tone, iron ore prices in AUD terms are the lowest since June 2009 and more than 60% below the AUD226/tone high recorded in April 2008 It’s worth noting, though, that despite the recent falls, iron ore prices remain relatively high compared to eight to 10 years ago, when ore was worth around USD30/tone


THE KEY

Iron ore is Australia’s largest export, accounting for 21% of total exports in 2011 (closely followed by coal at 15%). Given this, markets are right to focus on the implications for Australia of a falling iron ore prices.


Last Financial year, Australia exported 471 million tones of iron ore worth AUD63bn (USD 65.4bn) at an average price of AUD134per tone (USD139 per tone). China dominates the market for Australian iron ore shipments. In 2011, China accounted for 69% of Australia’s total iron ore exports. Other principal export markets for Australian iron ore include Japan (18%), Korea (11%) and Taiwan (3%).
Over 60% (or around AUD44bn) of Australian merchandise exports to China is iron ore, well above coal’s 6% contribution. Of Australia’s total two-way trade with China, iron ore shipments to China account for 39% and of Australia’s total two-way trade with the world, iron ore accounts for 8%


By state, Western Australia ships nearly all of Australia’s iron ore exports. In 2011-12, the WA state government collected AUD3.91bn in iron ore royalties. In 2012-13, it was expecting to raise around 17% of its total revenue (or AUD4.27bn) from iron ore royalties and AUD5.26bn in royalties in 2013-14. In terms of state budgets, therefore, WA is most exposed to the recent decline in iron ore prices



Impacts of a sustained USD100/Tonne Iron Ore price

1. While central view is that iron ore prices will recover over the next six months or so, here we analyze the likely impacts on the Australian economy should recent falls in iron ore prices be sustained

1. I consider a scenario where the average iron ore export price is USD100/tone over 2012-13 and the AUD exchange rate is USD 0.98 i.e. an iron ore price is AUD terms of AUD96.2/tone). This would represent a fall of 28% compared with the 2011-12 average price of AUD134/tone.
2. Forecast for Iron ore export volumes, total iron ore export revenue would fall from AUD63bn in 2011-12 to around AUD50bn in 2012-13 (a fall of 20%)
3. The most immediate effect of this on the economy is lower company profits. Assuming an average cost of production of Australian iron ore of AUD50/tone, profits from iron ore would decline from around AUD40bn in 2011-12 to AUD24bn in 2012-13. Total Australian company operating profits were nearly AUD264bn over the year to the June quarter 2012, of which mining accounted for AUD89bn. So a decline in iron ore profits of AUD16bn would see total Australian company profits fall by roughly 6%
4. Lower iron ore prices would also reduce government revenues through lower collections for company income tax, state mining royalties and the commonwealth’s Minerals Resource rent tax. There would be flow on effects from this to the extent that governments tighten spending or raise taxes and charges to offset this effect. This seems likely at the federal level given the Treasurer’s recent pronouncements about the determination to return the budget to surplus in 2012-13
5. Australia’s terms of trade would also decline further, meaning that national income growth would be lower for a given rate or real economic growth (mainly via lower profits and government revenues, as discussed above). An iron ore price that remains at USD100/tone over 2012-13 would represent roughly a 20% fall compared with the USD127/Tonne price at the end of 2011-12. Given that iron ore represents one-fifth of Australia’s total exports, by itself this is consistent with a fall in the terms of trade of more than 6%. This would follow the estimated 5% fall in the terms of trade over the six months to the June quarter. Over this recent period, nominal GDP (a concept similar to revenues) has grown more slowly than real GDP (‘volumes, and hence profits and employment growth have been more sluggish than is typical for an economy growing at trend real growth of around 3-3.25%. A further 4% fall in the terms of trade would likely continue to weigh on employment growth due to weaker private sector profitability and public sector revenues

Investments

1. What would be the impact on the pipeline of resources investment projects, which is currently underpinning much of Australia’s economic growth? Iron ore expansions or new mines account for some $65bn or 11% of projects of the estimated AUD574bn pipeline of possible investment spending between 2012 and 2016 (though there are some related infrastructure projects eg Port hedland outer harbor. Fortescue Metals Group last week announced that it will delay its Solomon iron ore project until the iron ore market improves. Beyond this, we would expect miners would find higher-cost projects more difficult to obtain finance for if iron ore prices remain lower, especially if the AUD REMAINS ELEVATED. This would increase the risk that further projects are shelved.
2. I remain negative but the market seems more positive about the resources investment outlook over the next 12-18 months. In spite of these emerging downside risk to the medium term, in the near term, much of the overall investment profile still appears to be locked in, dur to the large number of mega-LNG projects currently already under construction. The projects currently under construction in this sector have an estimated capital expenditure of AUD160bn over 2012 to 2016, and new projects have still been approved only recently. Accordingly, business investment will remain a key driver of growth for the Australian economy over the next 12-18 months, with double-digit annual growth in business investment expected until the Beginning of 2014 provided that China has a more aggressive policy than current stance.
3. As a number of mining and energy projects reach completion over the next few years, a surge in exports is expected to drive economic growth. The effect of this should start to be felt from 2015. Historically there have been very few occasions in which export volumes have declined significantly in Australia (The aftermath of the GFC was the main demand related occurrence-the dip in 2011 reflects weaker related disruptions to coal. Commodity prices typically do most of the adjusting with the AUD usually insulating the Australian economy and commodity producers. So, while global commodity prices will likely gradually ease over time as global supply increases, Australian miners if they hedge will likely generate profits through stronger volumes growth(though some of this volume growth will require displacement of some higher cost supply in China and elsewhere, which we expect to occur)

NEGATIVE FACTORS ON AUSTRALIA.



The magnitude of the downside effects described above may not be as great as estimated here. The analysis above is necessarily simplified and there are a number of factors that may mitigate these estimated effects to some degree:


The AUD could resume normal buffering role for the Australian economy and commodity producers if foreign investors hedge Australian asset exposures in response to a weaker commodity price outlook.


A lower currency would increase iron ore prices in AUD terms, reducing the impacts described above. Right now the market continues to expect Australia's relative high interest rates to attract further reserve diversification flows. However, as mentioned above if the Miners do not take appropriate hedging steps before hand the effect could make its way to reduced demand in foreign investment inflows






The RBA could be expected to see recent developments as impacting negatively on the Australian economy, especially if the AUD remains high, while commodity prices and the terms of trade fall further. Any further delays or cancellations of mining investment projects may add to this view.
Hence, the RBA could be expected to further lower interest rates – likely once the RBA sees the effects of lower commodity prices and a high currency flow through to the domestic economic data – to support growth. This continues to reinforce the negative view that there remains a strong downward bias to Australian interest rates,even though this is not the RBA’s current view.
(Remember the last time a central bank acted before a crises not after? Me neither.)




in early 2013, as Chinese growth strengthens after the Chinese leadership transition and once Chinese domestic mine supply starts to wind down. Until then, China’s steel market will dictate sentiment. However, remain wary that the risks to this view are to the downside in the short term, as noted at the outset of this article. The much-anticipated recover yin Chinese growth has yet to materialize, and the rebound in the heavy industry sector has been underwhelming. The drag on growth from Europe and slower-than-expected policy easing due to house price concerns has also disappointed. CNY economists have recently downgraded their expectations of growth for2012 to 7.8% (from 8.2% previously) and see the risks as remaining to the downside given the sluggish policy response to date. I t is possible that the authorities will remain too cautious about overstimulating the economy and house prices, given the experience following the GFC stimulus package. Risks around China have been compounded by the forthcoming leadership transition which may delay policy decisions until ministerial positions are confirmed later this year.




Australia's low cost producers may win even greater market share than expected at the expense of Chinese miners. China's domestic supply accounts for 65% of the country's needs, with the remainder met primarily by Australia and Brazil. Estimation of the marginal cost of production for Chinese iron ore is now as high as USD120/tonne. While demand remains weak this established floor price could fall to USD100-USD110 if high cost Chinese miners permanently close. Current iron ore spot prices are much lower, Few Chinese suppliers are able to compete with Australian producers, which have both higher quality iron ore and cash costs about 30%below current spot prices. China’s lower quality ore also means that production tends to be volatile and cash costs higher, with imports necessary to maintain steady supplies


However, even though nearly half of China’s iron ore mines are losing money at current prices, the authorities may choose to preserve domestic iron ore production to maintain a level of self-sufficiency. In Australia, rising cost challenges could also result in the refocusing of some development plans.


Australia's terms of trade will likely be affected by other commodity prices as well. Coal prices have also weakened sharply since Feb 2012. But offsetting the falls in iron ore and coal prices to some
degree will be the temporarily higher prices for soft commodities, due to drought conditions in some key global cropping regions




Western Australian and Commonwealth government revenues will be affected directly by falling iron ore prices if sustained or if the AUD does not adjust lower which is negatively affected by the weaker mining sector. This would then flow onto other states' and territories budgets.








Government


The western Australian Government, owing to the massive rise in iron ore prices over the past two years, was expecting to raise around 17% of its total revenue(or AUD 27bn) from iron ore royalties in 2013-13. For 2013-14, its forecast AUD5.26bn of iron ore royalty revenue. This forecast, which is more than double2009 royalty receipts is based on an average iron ore price of USD127 per tonne this financial year and USD115 per tonne in 2013-14.


Sensitivity analysis presented in the budget suggests that an iron ore price ofUSD100/tonne and an AUD at USD1.04, the WA Government would collect around AUD1.2bn less from iron royalties in 2012-13. If the sensitivity analysis also holds for 2013-14, WA revenues would be down around another AUD1.2bnin that year. Other things being equal, this would push the WA state budget into deficit in both years.


The Commonwealth budget would also be adversely affected blower iron ore prices, mainly through lower company tax collections and reduced revenue from the Minerals Resource Rent Tax (a very uncertain revenue item in the market’s view


The budget papers do not detail how much MRRT revenue is projected to come from iron ore producers, but this is expected to be a large share of the budgetedAUD3bn in 2012-13, AUD3.5bn in 2013-14, AUD3.2bn in 2014-15 and AUD3.7bnin 2015-16. Individual companies had suggested in the media that revenues will be well below these projections even before the latest sharp falls in iron ore prices.


In terms of broader budget impacts, the May budget had anticipated a sizable fall in the terms of trade in 2012-13, although it overestimated the rise in 2011-12.Overall, therefore, it’s not clear that commodity prices at current levels would necessarily eliminate the underlying cash surplus that is projected for 2012-13(noting too that mining revenue will depend on volumes as well as prices).However, there appears to be a reasonable chance that the Government will undershoot its revenue projections.


This does not necessarily mean that the Government will miss its target of a2012-13 surplus. Indeed, the Treasurer last week reiterated the Government’s intention to return the budget to surplus this year. Given the Government’s continued firm commitment to a 2012-13 surplus, we expect further spending cuts to be revealed in the mid-Year economic and fiscal outlook due in November. Consistent with this, recent press reports suggest that Cabinet is currently looking for further cost-cutting measures.




As noted above, lower commodity prices – particularly if recent divergence between commodity prices and the AUD persists – put additional downward pressure on interest rates. Consider the trigger for rate cuts from this would likely be weaker-than-expected labor market data (job ads and the unemployment rate) and continuing downward revisions to the investment pipeline (particularly if they occurred to in 2013 plans). In this environment,inflation could be expected to remain subdued and not an impediment to further policy easing.






The RBA is likely to have a continuing easing bias moving into 2014 as the mining investment boom winds down. This would be compounded by an economy that is more sluggish than indicated by around-trend real GDP growth due to the falling terms of trade, the risks to which are tilted to the downside. A declining terms of trade will weigh on overall real income growth and, in our view,employment growth.






Fixed Income


There are several implications for AUD bonds if this fall in commodity prices is sustained. Firstly, the stronger case for easier monetary conditions overtime should support bonds in terms of valuation. The attraction of the relative yield and credit quality of Australian bond is unlikely to be seriously compromised. Thee remains scope for some slippage in short term fiscal metrics without threatening the AAA rating. Net debt to GDP is currently around 10% compared to an average of around 70% for other advanced economies. Credit quality and positive rate differentials are likely to remain key drivers for off shore investors, although a sharp move lower for the AUD. There could be a reduction in underlying demand but not at the current moment with underlying trends. There is likely tax shortfalls in company tax and MRRT tax receipts will be made up with savings elsewhere.

But if there looked to be a more sustained budget shortfall without spending cuts or tax increases, it would have to be funded by issuing more bonds and that would put the current legislated debt ceiling of AUD250bn within range. Current Commonwealth Government Securities (CGS) on issue total AUD243bn, although there are over AUD25bn of maturities this financial year that will reduce the total. But, perversely, an increase in supply that does not threaten the sovereign rating would underpin a key attraction of CGS market. That is, it would improve market depth or liquidity of ACGB's and lift supply of AAA sovereign bonds. Almost 80% of current ACGB bonds on issue are owned by offshore investors.




The State where there are the most significant direct budget implications from iron ore is Western Australia, as highlighted above. Queensland's budget will also be impacted through lower coal royalties. But the numbers do not look sufficiently large to undermine WA's impressive credit metrics. Also, Commonwealth payments to the state would probably ultimately be lifted if royalty flows were to dry up. The very muted reaction in market pricing to the falls in iron ore prices suggests that states will continue to be tiered primarily according to credit rating rather than resource endowment. More importantly for the simis market in the near-term will be the Queensland budget on 11Setpember, which is expected to unveil heavy spending cuts to stabilize the state's medium term fiscal outlook.






Despite the clear downward bias for commodities, the market is expecting the Australian dollar to remain somewhat above levels implied by commodity prices alone. Behind this view of a more persistent divergence between commodity prices and the AUD is an expectation that demand for AUD assets from international investors remains strong. The lack of return available in core bond markets, and the building risk that expanding central bank balance sheets underpins future inflation, is set to see diversification flows into the AUD continue for some time. However, if risk starts to pick up and investors shift back to Emerging market and Euro area markets the expected inflows can fall short of expected Government numbers suggest.


This is not to say that the currency will not play its traditional role as a shock absorber for the domestic economy. If the slowdown apparent in China intensifies absent a policy response, we would expect a reasonably sharp depreciation in the AUD.

subscribed.. i am no. 1

nice name of thread with high qualities contents....like it

Subscribed my friend

I have started trading the Aussie markets more exclusively than ever because my hours(california) are more suited to the asia/australian exchange than london.


great job putting this together

Great thread and well balanced view.

Australia has an edge in price competiteness due to its open-pit mining operation, high Calory, good dip and mineable large reserve. There are many ways for a miner to profit thru this yearly cycle i.e., reducing operation cost. In simple terms get the deposit closest to surface. But agree on strong AUD will hurt in the long run.

PS. If may request, to use normal default fonts without formatting. This will make it easier to read from portables and mobiles because one character takes up a fullscreen lol

Subscribed. I believe this thread will help us less experienced traders to learn the FA to better forecast the market direction long or short.

Hello,
Have taken your work seriously, printed and read it twice. I do know nothing on your background and what is your personal aim in publishing this paper.

I guess that it’s not only to become the Justin Bieber of the Forexwonderland and have a lot of groupies If it’s the case, it’s better to stop reading what is following. If your aim is anything else, say for exemple, you want to improve yourself and help others with your knlowledge and experience, we can make « business » and you have permission to continue reading what is following

Preliminary remark on myself : my knowledge on economy theory and policies are at a sub zero level and I do a 1000% efforts to keep my knowledge at a subzero level on this field. Therefore, you will not find economic argument. You will find only critics, negative critics. No sweet words. Just pain in the ass without lube. But you have to take it as valuable advices and say thank you Maximinus.

But how is it that one can say I’m a nub in economy and I’m going to give advice to someone who wrote an economic paper. It’s perfectly possible if you have a good academic background, you are used to wirte articles, read articles etc…

Here is what to do for improving your paper and upgrade it to pseudo academic level.
1)change your friends who helped you for this paper, they are worthless for this. The may be ok for a beer or two.
2)Change your bias. You protest loudly (in the paper) that you are not biased (see line 3 and 4 « this is not a bear argument nor a bull arguement…) . Protesting is by itself a sign of weakness. Furthermore, read the title of your thread « australian bear raid ». And most importantly (and this point requiers to work hard), you say « While central view is that iron ore prices will recover the next six monts or so, here we analyse the likely impacts on the australian econ should recent fall in rion ore prices be sustained ». You have to say while de central view is X we dissent because of factors a,b,c etc… will not permit the recovery. And you have also to examine what if yoursel you are wrong i.e the raise of the iron ore prices. So you have only done one third of what is requiered, for a serious paper.
3)You have to give a better structure to your paper. The main ideas and sub ideas must appear clearly with your titles an sub titles. That’s not the case. A good paper is one whit two main ideas and four subideas. (If you want precision, or ideas how to structure your work I can tell you).
4)On the page one, there is repetition (due to a copy paste I guess ??) See para 2 (« The recen decline in spot… ») and para 5 (Two weeks ago the spot…).
5)No smileys (see p. 3)
6)Page 3. A mishandling in editing the text show the lack of seriousness in editing your text. The para in bold is not at his due place. This mistake would cost you your qualification in the real world.
7)When you debate on datas ou must also give them, the graphs or at leas one reference for the reader who want to check what you are saying. Always check by yourself what your interlocutors tell you and always give the possibilities for your interlocutors to check what you are saying. This rule is fundamental and admits no exception.

Is it ok if I give you one week to rewrite your paper ?

See you and bye.

PS. By the way thank you for posting your research and your opinion. I got your point.

i like swing trading aud. my bias is currently long. expecting longterm topping above 1.2 however your points are valid. next week 1/2 size sell euad at 1.25

Subscribed but first buying the bubbles

Maximinus,


Hello, I will state this paper is not intended for commercial promotion or a jumping piece to become a writer for a site. The whole point of this piece was to show what has occurred so far this year and what is still driving growth in Australia. I am very negative on Australia for parts of the reasons I have stated above but also on their banking side that I will delve more into as the thread progresses. I did try to keep the piece to an unbiased view as much as possible and show the good with the bad but I will state so that everyone knows at the outset.

 

1. I am Negative on the AUD economy not because of the same old argument of Real estate bubble but there is a inherently dangerous model they have structured growth around (Banking/Mining/Rates). I will go into this more and give pure facts as the thread progresses. Now on you part about getting rid of my friends, my former job I spoke with individuals from all spectrum’s of the financial world some worked as analyst and some are current traders both for themselves and for banks . The individual at one of the AUD banks made sure the numbers were correct and also pointed me in direction that needs the most focus. They are helpful in their input and can share much better insight into what is 'really' going on better than Stevens could.
   
2. I expect critics and to a certain extent welcome them. This is not to say I won't allow them to post ,I will NOT BAN ANYONE who is bullish on the economy or who reverts to talking ill on my views. I am not a child who if I get called a name will ban you like certain ppl I have seen
   
3. I don't expect the crash to happen this year but I know that this market on futures/spot can retrace very quickly and come back up as AUG/SEP so far proved. So the eternal pessimist out there can still make money in the mean time.

 

1. I want people who live in Australian or who are bullish on the economy to post if they wish so that I can go back to the drawing board and rethink my hypothesis for my overall framework on Australia.

Yes looking at the piece once more I do see several editing errors and formatting errors but this was not due to me not caring this was quite the opposite. I actually took several weeks out of my spare time rechecking sources and going through the numbers day in day out to get this together. Finally, I came to the conclusion that yes I know for a fact I am a terrible writer and that this is not my strong suit in life but I hope that those who read it understood a bit of what I was trying to convey and if they are still uncertain I will always be happy to answer.


I will rewrite the paper if someone pays me for the new copy, but no I don't plan on rewriting it again lol.. What I have discussed above will all be broken down into detail as the thread progresses along with more talking points that were not mentioned. I will promise until the big moment comes I will always post POSITIVE AND NEGATIVE news, numbers, updates, on Australia.


On the Question of why post this thread: ego, bieberism ha, promoting negativity????
I like FF but there is scattered information that ppl need to search for on a particular economy or pair to gain real traction. I want to format this thread as the one stop shop for discussion, data, fundamental shits, and news on Australia. This is a trading journal so I will post trades as mentioned but I want this thread most of all to show in real time a current model of Boom/Bust that is approaching the late stages.

maybe your predictions were correct, and 1,0620 is a new top. I'm starting to think, that qe3 were priced in and now we have some kind of bull trap. Printing money only help banksters.

Hello JPLazard,
When you first announced in audusd thread that you are writing a paper on the australian economic situation, I thought that you were researcher or something like that, so my expectation was high. My bad interpretation explain my first reaction, post ,in this thread. Therefore, it’s my duty to edit my first post, and I accept to delete the first part that was ironical and/or kidding if it's technically possible and if you accept.

You do not really need to say because I know very well that this is a time consuming and unrewarding activity. So a big THANK YOU for permitting for all of us to access on one spot fundamental datas and news.

(Mode kidding ON again and yet serious)
No man, it will be great if you decide to rewrite the paper by yourself and for yourself, you will gain an unvaluable experience that will permit you to learn a lot on yourself. (Mode Kidding OFF )
Bye and thank you.

At the moment finishing up the spreadsheets for the following going back several years to get a feel for trendline I will post very soon.

AIG Manufacturing Index Commodity Prices y/y AIG Sercices Index Trade Balance AIG Construction Index HIA New Home Sales m/m Retail Sales m/m Building Approvals ANZ Job Advertisements m/m Home Loans m/m Westpac Consumer Sentiment New Motor Vehicle Sales m/m MI Inflation Expectations Employment Change Unemployment Rate Import Prices q/q PPI q/q CB Leading Index m/m M1 Leading Index m/m CPI q/q Trimmed Mean CPI q/q NAB Business Confidence Private Sector credit m/m MI inflation Gauge m/m Cash Rate RBA Rate Statement RBA Monetary Policy Statement Monetary Policy Meeting Minutes Wage Price Index q/q Construction Work Done q/q Private Capital Expenditure q/q GDP q/q RBA Bulletin RBA Financial Stability Review

As for the Equity side all of these sectors and individual companies will be covered. They are more reliable than the snapshot economic reports and RBA bulletins which come out every other week.

Financial Sector Profile
http://www.asx.com.au/documents/rese..._factsheet.pdf

Industrial and Materials (ex Metals/Mining) Sector
http://www.asx.com.au/documents/rese..._factsheet.pdf

Resources (Metals/Mining) Sector
http://www.asx.com.au/documents/reso...and_mining.pdf

Happy about the 127.2% held up and we retraced from that level. I took off some more I want to be square before the week kicks off to get the failed trade off the book and start a new.
Shorts left are 600,000 and will look to Monday AUD minutes for the final closing.



I am happy so far on the ways that I am getting out of the short as the loss was a bit over 30K now down to 24k and some change. Big lesson I learned long ago in position trading by some smart ppl that you will be able to get out of a losing position just don't freak out and close at once because there are always levels for better exit.

Recently started following this thread some of these guys are giving away some great numbers and the topic of discussion is from actual AUD home owners and investors.. Great site so far

http://australianpropertyforum.com/index/

Big conference between CHINA/AUSTRALIA going on right now I will give updates if anything interesting is said. Otherwise the dialogue most likely will be we love China, we respect China, and please China start being more aggressive on stimulus or where in a bit of a pickle.

http://www.theaustralian.com.au/busi...chinas-century

Interesting Article I just read on QE3 and possible spillover effect on $A


One of the more strident ideas that have been put forth by Australia's chorus of economic elites – which includes the government, RBA and senior media commentators – is that there is nothing that we can do about the high Australian dollar. This is poppycock. Let me explain.
The dollar is rising once more because Fed chairman Ben Bernanke has announced QE3. He will be printing an additional $US40 billion per month to buy MBS. The reasoning of markets goes that this will debase the US dollar so it therefore sells US dollars, and buys ours.
But in truth, $US40 billion is not a lot of money nor a persuasive debasement of the currency at all. QE1 was $US1.5 trillion. QE2 was $US600 billion. Moreover, and here's the real point, the $US is so completely dominant in global currency trade that it turns over some $US3.6 trillion per day.
While we're not supposed to compare a stock (amount of dollars in circulation) with a flow (the turnover of those dollars), the discrepancy in the comparison is so vast that it gives you an idea of just how paltry the Fed's efforts really are.
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Yet in the days leading up to and since the announcement of QE3, the US dollar reacted as if Ben Bernanke were printing $US40 billion per minute. The printing press is yet to roll but the US dollar has already fallen 5 per cent.
This is because of one simple reason. The real power of the Fed's decision is in the symbolism. Contemporary markets are not some simplistic abacus that calculates how many US dollars there are in circulation every day. No! Markets are made up of a dynamic set of traders and investors that make bets with other people's money against one another. They position themselves based upon what is supposed to happen, what they've been told will happen, as well as against what they think other traders think is going to happen.
Hence, the power of symbolism is mighty. All the more so on this occasion because Bernanke and Co have made a commitment to keep printing their monthly $US40 billion forever or until unemployment falls (whichever comes first!).
So, with this in mind, let's speculate about what might be done to lower the local dollar. "Economists" are suddenly awake to the danger and are offering one way.
They warned that the Fed's plan, which followed further stimulus from the European Central Bank last week, could damage the Australian economy by keeping the currency at elevated levels, forcing the RBA to cut interest rates.
Macquarie Group economist Brian Redican said the latest round of quantitative easing was unlikely to boost iron ore prices, which fell from $US100 a tonne earlier in the week to $US96 following Bernanke's announcement.
“That crunches mining company cash flow and raises a big question over mining investment,” Mr Redican said. “If that happens then that blows a big hole in your growth profile. This is why I don't think the RBA can continue to ignore [the Australian dollar].”
Correct, it cannot. And Redican's solution of lowering interest rates is not inconsistent with the needs of the economy. We are are likely going to need a further two rate cuts by year end, my guess is in November and December.
But markets know this already and it is self-evidently not enough to prevent the current charge into the currency. One reason is that rate cuts actually encourage an inflow of capital initially because it means the coupon value of Australian government bonds will rise as yields fall. There's good capital gains to be made. Another is Keynes' maxim about currencies, that they are a beauty parade, and the least ugly will win, full stop.
If you want to lower the currency you need more. You need to do something that introduces the fear to traders and investors that other traders and investors might be afraid of currency-related losses.
This might be done with threats from the RBA that it is targeting the dollar. But given this threat implicitly involves risking changes to local money supply that the economy in aggregate does not justify, you have to question whether it is good idea. Also, the RBA's effort to contain credit growth over the past few years, which were in part based upon the knowledge that we have overly indebted households, may mean markets do not believe the RBA's threats.
An alternative is that the government could lend a hand by calling for an urgent inquiry into how to lower the dollar. It might explore Tobin taxes or reversing some of the tax breaks that hot money inflows enjoy, any number of fiscal nudges that would place a question mark over the one-way bet that traders currently reckon that they enjoy. But again, the threat needs to be credible and after cheerleading the dollar ceaselessly through the cycle, I'm not sure markets would believe a government backflip now.
And you do have to be careful. There is a reason our elites are so terrified of questioning the value of the dollar. As a current account deficit nation, we need to attract capital to keep growing. Moreover, the principal driver of that current account deficit is excessive investment into housing via offshore bank borrowing. The elite are terrified, I suspect, of doing lasting damage to these flows and, at the extreme, plunging us into a either a bank-funding or current account crisis. And with justification.
But you can't just sit around watching an overvalued dollar hand your production base to everyone else. This increasingly applies to mining as much as it does to other tradeable sectors. That is why all other nations are locked in a struggle to lower their currencies. To protect their market shares and steal more production and jobs from anyone else that they can, including Australia. A high dollar that is decoupled from bulk commodity prices is not a badge of honour. It is a target painted on your back.
So, is there a way out of this quandary?
Yes, there is. What you need is an action that is symbolically powerful enough to create the resonance of fear in traders and investors but not so extensive or ill-conceived that it upsets long-term capital flows.
To me, that is the solution that has been proposed by former RBA board member, Warwick McKibbin; that the RBA can declare it will print money and give it to the 70 or 80 central banks that are also piling into the dollar owing to "portfolio flows":
It is clear that it is better to take the appreciation of the real exchange rate caused by a commodities boom through a stronger currency rather than through higher inflation. However, it is important to understand that whether or not to intervene in the foreign exchange market depends on the shock hitting the economy. Allowing a pure float is not always optimal, especially if you have information on the nature of the shock driving the exchange rate.
There are many factors driving the value of the Australian dollar. The case of foreign central banks buying Australian dollars is particularly unusual. If foreigners want to hold more Australian dollars in order to park these dollars in foreign exchange reserves and will not be using these dollars to buy Australian goods and services, then the best response is for the Reserve Bank to print more Australian dollars.
These additional dollars should be sold to foreign central banks in return for foreign assets. The foreign assets would appear on the RBA balance sheet exactly balancing the increase in money supply. There would be no effect on the domestic economy from this global shock if the RBA undertook this transaction.
The symbolic power of this would be much more important than the actual amounts. As in the case of the US, traders would have no choice but to take currency debasement seriously.
But because the central bank portfolio flows are unprecedented and will not last anyway, they can be rightly represented as an aberration, and any move to contained them equally so. The measures can be removed as soon as no longer deemed necessary, and it will not do permanent damage to the integrity of the currency.
Some have suggested that the McKibbin plan is driven by vested interests. That is true. We all have an interest in not waiting until the realpolitik of other nations does so much damage to our economy that plunging interest rates and a government deficit will be needed to support it

So I am trying to find a way to structure this thread to incorporate my trades, 250+ AUD stocks (earnings, guidance, calls) Economic reports, and News digestion from 12+ papers and I will have a layout very soon on what will be reported which day and exact times so that this thread does not end up scattered. I want a viewer from the most recent post to be caught up as if they were reading the very first page. I will think about this tonight but rest assured before the week is done I will have a great format for

.NEWS (biz publications commercial/non)
. Econ reports spreadsheets given showing trend and points of interest
. Equity updates, news, calls, earnings,
. Personal op ed piece here and there for both bulls and bears can enjoy
.Trade calls ENTRY/EXIT

As expected... very good post Jplazard. I especialy liked the comment about having a target painted on the back. Very true and it made me laugh. It is good that you were able to throw some of your nice humorous wit in there.

I also, saw that video you posted about the friendship between China and Australia. It was indeed interesting how Australia is strict on visas from communist China. The U.S. does business with China too. But we don't share all of our military secrets with China that we might share with some democratic advanced country. If that makes any sense. Not to mention the fact that Chinese are well known for defecting from the P.R.C. once they get to their new targeted country. If I lived in the P.R.C. I know I would want to go to a country like Australia. They have a big Chinese community... from what I hear. Plus more freedom.