Global markets

In the media last week, we emphasized the prospects for a hard landing in Australia. Being tied, by commodities, to the slowing growth of China puts Australia in the path of a serious economy malaise. Since 2010 we have been warning investors about the declining iron ore prices, Australian dollar and employment prospects. Back then China’s growth was being advertised at 12 per cent – fuelled in no small part by the property glut that was under construction. continue…

by Roger Montgomery Posted in Energy / Resources, Global markets.

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In this interview with Ticky Fullerton on ABC’s The Business on 6 May 2014, Roger looks at the Chinese export and property industries, and how they impact the Australian economy. Watch here.

by Roger Montgomery Posted in Economics, Global markets.

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The Nasdaq fell more than 3 per cent overnight. What’s behind it? continue…

by Roger Montgomery Posted in Global markets.

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In this interview with Ticky Fullerton on ABC’s The Business on 8 February 2014, I discuss the implications of the recent Australia-Japan Free Trade Agreement, and the moves that should have been made instead – starting with a comprehensive tax review. Watch here.

by Roger Montgomery Posted in Global markets.

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Condemnation of Russia’s annexation of Crimea by Ukraine’s northern and western neighbours has been surprisingly quiet, and once again the US has been left to do the heavy lifting in terms of playing “global sheriff”. continue…

by David Buckland Posted in Economics, Global markets.

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By Derek Scissors, published in the South China Morning Post

People are going to be discussing the flaws of Chinese finance for many years. Here’s a helpful guide: as soon as you see or hear “China’s Lehman moment” used seriously, stop paying attention. continue…

by Guest Author Posted in Global markets.

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Over the past decade many Chinese-based companies have listed in the US. For the larger stocks, such as PetroChina, China Mobile and CNOOC, the American Deposit Receipt (ADR) represents a secondary listing, and often Hong Kong is the primary place of listing.

However for about 200 smaller stocks (with an aggregate market capitalisation of US$84 billion), the US is their primary market.

continue…

by David Buckland Posted in Financial Services, Global markets.

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The Federal Court’s decision against ratings agency Standard & Poors has significant implications for both the Australian and global markets – Roger provides insight into why this is so in discussion with Ticky Fullerton on ABC1’s The Business broadcast 6 November 2012, together with his insights into the latest RBA rates announcement. Watch here.

by Roger Montgomery Posted in Global markets, TV Appearances.

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In 2008, China implemented a massive economic stimulus program focused on fixed assets, with a concentration on construction. This program may have been necessary for stabilisation, but led to significantly increased capacity, particularly in China’s steel and cement industries. Annual capacity growth in recent years has been double or triple China’s economic growth.

Australia’s material stocks were beneficiaries of strongly rising demand for coal and iron ore, and many were at or near record share price highs in the first half of 2011.

Meanwhile the Shanghai Composite Index at 2100 is at the lowest level since the GFC lows of late-2008.

The consensus view is for increased infrastructure spend from China over the foreseeable future to boost demand and prices. If correct, one might conclude that the slowdown is already “priced in”. However, we have been examining the interim results of Chinese cement, steel and shipbuilding companies. We are seeing severe earnings downgrades across the board: capacity is exceeding production, utilisation is declining, demand is restrained and inventory levels are rising. Excess steel production is being exported and many global steel and material companies are also seeing their earnings severely cut.

While the Chinese command economy might continue building the odd ghost city or expressway into the Gobi Desert, the transformation from fixed asset investment to consumption is less steel intensive. Until the severe downgrade of the Chinese (and international) material stocks becomes consensus, Montgomery will continue to keep our powder dry in this area.

by Roger Montgomery Posted in Global markets.

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“The more European leaders talked at a dinner last Wednesday, the grimmer Angela Merkel looked. One after another, they spoke out in favor of the joint assumption of debt and against the strict austerity course Berlin is calling for. The chancellor stared silently at the man who was responsible for this change of mood — France’s new president, François Hollande, who noted with satisfaction that there was “an outlook for euro bonds in Europe.”

Merkel disagreed, saying that euro bonds are not the right tool, but to no avail. Only a minority stood behind the German leader. Even European Council President Herman Van Rompuy said, at the end of the dinner, that there should be “no taboos,” and that he would examine the idea of euro bonds. “Herman,” Merkel blurted out, “you should at least say that some at this table are of a different opinion.”

…..

The fight has only just begun, and so it comes as no surprise that the roar of battle is drowning out everything else at the moment. But there are also signs of rapprochement. During his first official visit to Berlin, Pierre Moscovici, the new French minister of economics and finance, revealed some sympathy for the German line. He confirmed the new French government’s intention to reduce the national deficit in the coming year to below the upper limit of 3 percent of GDP, and to eliminate all new borrowing starting in 2017. He also underscored how important healthy budgets are for growth and employment. Those who have too much debt become impoverished, he said. And those who are poor, he added, cannot invest.”

From:  http://www.spiegel.de/international/europe/merkel-preparing-to-strike-back-against-hollande-with-six-point-plan-a-835295.html

I like Greg’s post on this subject here on the Insights Blog earlier today:

“With respect to Eurobonds, investors should understand that what is really being proposed is a system where all European countries share the collective credit risk of European member countries, allowing each country to issue debt on that collective credit standing, but leaving the more fiscally responsible ones – Germany and a handful of other European states – actually obligated to make good on the debt.

This is like 9 broke guys walking up to Warren Buffett and proposing that they all get together so each of them can issue “Warrenbonds.” About 90% of the group would agree on the wisdom of that idea, and Warren would be criticized as a “holdout” to the success of the plan. You’d have 9 guys issuing press releases on their “general agreement” about the concept, and in his weaker moments, Buffett might even offer to “study” the proposal. But Buffett would never agree unless he could impose spending austerity and nearly complete authority over the budgets of those 9 guys. None of them would be willing to give up that much sovereignty, so the idea would never get off the ground. Without major steps toward fiscal union involving a substantial loss of national sovereignty, the same is true for Eurobonds.”

At worst your SMSF hangs in the balance.  At best expect a wild ride.

Posted by Roger Montgomery, Value.able author, Skaffold Chairman and Fund Manager, 29 May 2012.

by Roger Montgomery Posted in Global markets, Market Valuation.

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