Gold Primed To Fall

Gold Primed To Fall

Gold fell almost 2% overnight and yet again reinforces the wisdom of not going with the crowd. With record long positions held by hedge funds, pension funds, money managers and retail investors, gold was primed to fall against this almost fever pitch of buying.

On the other side of the speculators, there was a record number of short positions held by what is classed as Commercials. They are the companies that dig gold out of the ground and sell it for a profit.

On one side you have a group of people who are speculating. On the other it is simply a business decision.

Given that the speculators are almost always long at the top and short at the bottom, the emotionless Commercials have the right strategy.

Credit Rating

Credit Rating

There has been a lot written about the decision by the ratings agencies to lower the credit rating outlook of Australian Government debt. This is actually significant for the market although the negative outlook means that the actual rating may not change for another 18 months.

Apparently the ability of the government to continue fiscal reform and to get the budget through the Senate is all that is required to maintain the Triple A rating. A quick look at the composition of the Senate tells me that the outlook may be reduced faster than thought.

A little reported event that occurred at the same time the government got their rating cut was that the Big 4 banks also had their outlook reduced to negative as well. It makes sense that this would happen as the market believes that the banks are given an automatic lifeline if the credit markets seize up.

Hedge Funds Target Australian Banks

Australian Banks under fire by the Hedge Funds again

Rising bad loans and falling earnings are the trigger

It seems that the mainly international hedge funds have set their sights on the Australian banks yet again. Current data shows that the funds have ‘borrowed’ A$9bn worth of stock to sell short against the Big 4 banks in Australia. The trigger for this increase to record short selling against the banks started with the ANZ’s most recent result, which saw the bank cut its dividend and increase their bad and doubtful debt book for the first time since 2008.

Australia’s big four banks facing a looming time bomb

Australia’s big four banks facing a looming time bomb

More than 230,000 brand new apartments are expected to settle within the next 24 months, thanks to record-high levels of construction, but they represent a significant risk for Australia’s big four banks.

More than 80,000 apartments and units are expected to settle in both Sydney and Melbourne, with Brisbane expected to see 44,000 units settle within the next two years, according to CoreLogic RP Data.

The problem comes when you compare the average number of unit sales annually over the past five years with a big disconnect appearing. The historic sales figures include sales of both new and existing apartments, and new stock usually accounts for a smaller slice of total sales than resales of existing stock.

Big 4 Banks results

Big 4 Banks results

Australian Banks have reported weaker results than last year

Outlook is less optimistic

The big 4 banks have reported for the half year and there have been some interesting outcomes. Essentially, the banks are way past their golden years.
With a higher cost of borrowing, combined with a lower margin on their lending, the big 4 are now finding life to be tougher than the past 8 years.

Outlook is less optimistic

The big 4 banks have reported for the half year and there have been some interesting outcomes. Essentially, the banks are way past their golden years. With a higher cost of borrowing, combined with a lower margin on their lending, the big 4 are now finding life to be tougher than the past 8 years.

Bubble, what bubble?

Bubble, what bubble?

The recent Commodity rally is not what it seems

The majority of trading happens at night

Earlier this year, the commodity market started to rally. In particular, the Chinese market saw a rapid rise in volume that make previous bubbles seem tame.

Over 2 months, daily turnover on Chinese future’s market rose by an astonishing US$183bn, which eclipses the previous booms seen in Chinese equities and even the Nasdaq boom of 2000.

Incredibly, the length of time held for these futures contracts barely lasted 3 hours for Steel and iron ore contracts.

Why China is the Big Worry

Why China is the Big Worry

Most people think that China is a great success story in being able to transition from Communism to Capitalism in a little over 1 generation, unfortunately that is not the case.

This article from Bloomberg takes a light-hearted look at the current woes facing the Chinese economy.

A quick look at the chart below shows the perilous state of Chinese debt levels

Negative Interest Rates in Australia?

Negative Interest Rates in Australia?

Negative interest rates are growing worldwide, is Quantitative Easing to blame?

The Reserve Bank cut rates to a record low, could we get negative rates?

The idea of Quantitative Easing (QE) has been established to allow more money to flow into credit markets and by doing so, increase the ability of banks to lend money. QE1 started back in 2008 when the US Federal Reserve stated they would buy bonds each month. They did this by issuing said bonds to their Primary Dealer network, whether they wanted them or not.