The Australian dollar may reach parity against the US dollar in 2010

Politicians love a strong currency in an economic crisis. It's more of a political posturing than anything economically viable for a country (especially when exports have been hammered, as in the case of Japan), more so if the country with a strong currency amidst a global recession or 'crisis' and continues to swell it's deficit. This could be seen recently in Japan's Finance Minister Hirohisa Fujii saying on the 28th September 2009 [quoted], "It would be a mistake to artificially influence foreign exchange rates". this was said after the Japanese Yen against the US Dollar traded just under 90 Yen. The remarks were then retracted on the 29th September 2009 [quote] "If moves are irregular, there is a possibility we might take whatever action deemed necessary for the sake of the country".

I believe in strong currencies and healthy goverment accounts. But as the reserve currency (US Dollar) of the world is rapidly losing it's purchasing power and it's value, then we have distortions in the Foreign Exchange markets and added volatility via politicians. It's not that the Yen is particularly a favorable currency of value (Japan's cash rate sits at 0.1%) but against the US dollar, and if a politicians make remarks that 'they won't intervene, then the market 'buys'.

Of course Japan relies on exports which have been decimated by the global recession a slow recovery is on the cards for Japan hence the desire for exporters to have a weaker Yen. So there is a lot of political and economic issues surrounding the currency markets; especially as the American economic policies are too further weaken the US dollar, one should prepare in the FX markets that the currencies will reflect distortions via USD weakness.

I had a put on the Australian dollar prior to the massive sell off of the AUD on 9 July 2008 (peaked at 0.97 and collapsed to 0.60 20th October 2008) I sold my warrants just as the US Dollar rebounded in November/December 2008, re-bought AUD put warrants with an expectation that stocks could go lower and break supports and the US Dollar could strengthen short term into 2009. This was incorrect as stocks hit their lows, as we know rebounded incredibly from November 2008 and March 2009, so there was a sell on the AUD put and replaced with call option. So with the markets, as they are presently, continues to rally within a trading rage refer to Dow still showing downside pressure, but no substantial correction at this point , the risk currencies such as the Canadian Dollar, Australian Dollar, Brazilian Real and even the European Dollar have all shown investor interest (not to forget the Japanese yen, which is normally a risk averse currency).

There were currency strategists that made calls prior to the huge AUD sell off last year claiming the AUD could reach parity against the USD. I thought that was just too optimistic especially after the Lehman collapsed. This time the parity aspect of the AUD against the USD is looking more realistic, especially when the global ecomomy has stablized and the Australian ecomomy is whisper away from overheating (inflation) namely housing (which did not correct when the recession hit in 2008). So the Reserve bank of Australia looking likely to lift rates from it's historic ow of 3.00%. With a combination of 0% interest rates in the US, plus investors pouring money into other markets and away USD denominated assets; the Australian dollar maintain its attractiveness and will continue to rally, unless a substantial stock sell off occurs in the next 3mths. Either way, with the Federal Reserve not concerned or doesn't care about inflation, US dollar weakness with most definitely drive the Australian dollar high. Parity could occur at some point early 2010.

*morbius glass doesn't give investment advice, trade at your own risk

Governments with huge deficits will be reluctant to increase taxes - The French 'planning economy' model

So they (goverments) will instead cut spending, so in the sense they will cut services across the board; usually essential. But just build a lot of roads.

It will be interesting to see which governments will essentially implode and that given time line is for implosion is hard to predict, still it might be sooner than we think

from Bloomberg (re: France goverment fiscal policy and credit rating)

“France is in a dreadful debt dynamic,” said Guillaume Sciard, who oversees 3 billion euros ($4.4 billion) of bonds at Barclays Wealth Managers France in Paris. “France will lose its AAA rating by 2012. In Europe, Germany may be the last to potentially keep its AAA.”

Marc Faber keeps it real.

Yahoo Finance Techticker Sept 22 2009

Repo Man scene - Harry Dean Stanton. director Alex Cox - 1984

Fuck this takes me back, way back when I was a kid. I love this movie, this scene. Harry Dean Stanton (Bud - Repo man), damn fine actor.



Dialogue with Otto (Emilio Estevez). Not in youtube clip. Great stuff.

Bud:
As long as you have good credit,
and my credit is spotless.

Credit is a sacred trust.

It's what our free society
is founded on.

Do you think they
give a damn about bills in Russia?

I said, do you think they give a damn
about their bills in Russia?

Otto:

They don't pay bills in Russia.
It's all free.

Bud:

All free? Free my ass!
What are, you, a commie?

Otto:

I'm no commie.

Bud:

You better not be!
I don't want no commies in my car.

No Christians either!


Repo Man director Alex Cox 1984

Goverments maintain deficts, because they are stupid.

Simple.

Synchronized deficits in every developed ecomomy in the world. Nice huh? The 'crowding out' (private sector crimped, thanks to government expansion and absorbing liquidity i.e higher taxes) phenomenon is now, not later. In Australia there is a economic paradox thanks to fiscal stimulus, what happened was the housing sector ticked up after the government threw huge amounts of cash at the housing market. This is now been scaled back and by the end of December 2009 most of the housing grants will be gone.

Suffice to say, two things happed whilst the market re-inflated 1. the rental market started to open up (people left rental to purchase property) and 2. the office/commercial rental market maintained it's glut. You can see this, lease signs for both commercial/residential and sale signs for residential with sold on them. Think about the equation, it is most likely the majority of investors/purchases of property (namely residential) hold more liabilities than assets, let's say 80% liability to 20% cash. The goverment is essentially now trying to cool down the market, taking away housing stimulus, so we should see a lot of buyers equity diminish (demand collpases after stimulus withdrawal) fairly quickly; so with higher unemployment looming rental yields will not cover over leveraged buyers/investors - so at some point they will sell quickly otherwise they will be caught in a squeeze. This could essentially start the long overdue Australian mortgage meltdown. Despite Australia's stimulus (mortgage) leading to further credit chaos in the future. The big one is commercial (not just in Australia, but everywhere else), anyone that says to me that stimulus has saved the ecomomy is is not keeping up with reality, nothing was saved. The private sector is toast, go into your CBD, read up about the commercial property market and see for yourself it's oversupplied. Private investment into business is gone, private sector has shrunk dramatically.

Graph explains it all (US market):

Oil on a 25mth cyclical bull run. Update 5 - oil sits in static range with potential 'breakout'

If you look at the oil price from the 1st January 2007 ($61.00) when it began it's bull run to it's peak of $147.00 (7th July 2008) - the key date for a cyclical rally again occurred again on the 1st Janaury 2009, hence the 2yr run occurring

There is a trading range sitting between supports of 58 and 70. The resistance being at 70. One should note on the daily and weekend graph that the volumes are very thin, but with the price sitting in stable range; it would indicate that a breakout could occur relatively soon through 70. Of course oil is a conflict barometer, namely the middle east and more specifically Iran. With the period leading up to the 147 market in July 2008, there was buying potential on Iran/Israel tension throughout the 2007/2008 bull run.

There is currently a 'buy and hold' on oil pending the recent Iran/US and Israel tension.

refer to graph (monthly):

Jerky Boys - The Home Wrecker

Had to put this one up here...classic

USD strengthens...on Obama's Iran threat (veiled)

The US dollar needs a conflict to strengthen, refer to: The USD will only recover if China's economy collapses or there is a war.

See the USD is a dying currency, nothing will save it (economically) at this point; what will give it cause to reprieve will either be a conflict or economically there is another collapse (stocks, markets). Otherwise the Fed keeps printing money and the dollar keeps heading down.

So we ge this: (from The Age 28 Sep 2009)

"THE Obama Administration plans to tell Tehran this week that the nation must open a newly revealed nuclear enrichment site to international inspectors ''within weeks'', according to senior US officials.

From the White House to Europe, senior officials were pushing to exploit the disclosure of the covert facility as a turning point.

The United States will also seek full access to the key personnel who put together the clandestine plant."

And Obama tells the media now about this 'secret' base?: (from Newsmax.com)

"According to The New York Times, Obama was informed of the site in Qom, Iran, by Bush administration officials at some point after his election last November.

Earlier this year sensitive equipment was moved to the site, prompting Obama to reveal its existence on Friday night at the G-20 economic summit in Pittsburgh. On Saturday, Obama issued an ultimatum to Iran"

It will be interesting to see what occurs and how serious this will escalate into, but the market is currently risk averse 'on'. Note the Euro v's Japanese Yen (safe haven) in the last 8hrs:

Behemoth - Ov fire and the void clip

Remember the Left hand Ov god clip? These guys just topped it with their new clip.

A crazy dream...

but yet satisfying .

It involved Duran Duran's 1980 single Plant Earth and Eniko Mihali. Well actually she was dancing to the song in my living room. Then I work up

Below some pics of supermodel Eniko Mihali (she is on the left of both shots):

Investment update - September 2009. Buy on stock dips

It is now evident that a substantial correction may not occur in the stock market, whether it's run away or not. Clearly the evidence that excess liquidity (Federal Reserve printing money) and 0% interest on the US dollar is contributing to stock rallies is overwhelming.

So buy on dips.

At this point it is still pharmaceuticals, again on the back of two thing's President Obama's health care place (disastrous for the US ecomomy, but good for pharmaceutical stocks) and H1N1 (Swine flu). So far Pharmaceuticals have been a winner for me, buying cheap last year (on the other virus concerns like Bird Flu, SARS,) it is speculative but could gain momentum on the above mentioned reasons.

Gold obviously for an inflation hedge and insurance for any future 'crisis brewing', at this point both gold (physical) and warrants. Silver is cheap, but again a 'crisis' would be the mover of the silver price. Oil, as both stocks and the oil price are trading in nice tight ranges.

The rest is ETF's namely Asia (China/Japan).

*morbius glass doesn't give investment advice, trade at your own risk

The selling of the US dollar - a USD currency crisis within the next 3mths.

In July 2009 I wrote a blog post titled Coming risk aversion Q3 - Will the USD be a haven? outlining the analysis that the US dollar may not gain strength in the last quarters of 2009. This of course is counter when the market becomes risk averse as the markets dump risky assets and move back into low yielding currencies and other assets (such as the USD). My analysis has been correct as the US dollar has not gained on any risk aversion exposure, as stock markets continue to rally and a degree of immunity to adverse news and economies have stabilized.

But the obvious aspect of a declining USD is the fact, now a market consensus, that a 0% yield on USD dollars mean very little if any desire for investors to buy the USD. So with limited value and paying no interest the markets begins to speculate, as it is doing currently, this then can be seen in stock market rallies.

So with stock markets now become re-inflated bubbles, the broader global economy also now has to grapple with a declining USD. Since the USD is a base currency of the world it is decline is causing imbalances in other economies, this all when the global economy after it's massive decline in productivity and output in the last quarter of 2008 faces now not only trade imbalances from various countries, but synchronized global (fiscal) deficits in every economy. Which means that economies now are desperate trying to realign their economies and stabilize growth (trade and accounts). The question is after one of the biggest slides in the history of capitalism; are countries capable of stabilizing and growing their economies with massive deficits and trade imbalances? The answer is no. In fact the exports markets of Asia have literally frozen despite some inter-trade between Asian countries, the main consumer of Asian products is the US and the consumer in America is struggling. This has reverberated back to Asia and caused massive export declines in both Japan and China.



The currencies gains that have been against the US dollar have been from the commodity producing countries namely the Australian Dollar (AUD), Canadian dollar (CAD) Brazilian (Real), Argentina Peso and the New Zealand Dollar (NZD). This would be more so on USD weakness rather than output gains on exports, refer to the post China's beat down of Australia - it's all about business.
A down side from USD weakness which cannot be ignored, is it drives up other higher yield risk currencies, namely the commodity producing currencies. With a weakened global economy high prices for exports is not desirable, as the buyer is looking for a cheaper deal, since their (buyer's) economy has yet to return to financial strength.

Undoubtedly we are going to see some disputes regarding the declining USD, more so from China, Middle east (Oil producers) and South America.

The fear is a currency crisis in which the USD collapses through it's support of 70.79 (March 1st 2008 low). This may spark intervention by central banks, or a coordinated devaluation of high yielding currencies (which may happen anyway to protect their exports)

Refer to graph, note the support at 70.79
Rapid selling in September 2009 would indicated that most FX (foreign exchange) long positions have been closed off - so a collapse has already begun. Unless there are some near term net buyers of USD. The March 2008 support could be broken within the next 3mths.

morbius glass quote of the month – September 2009

Ok this quote is from the Watchmen movie/comic. I actually think it was a very dated story in someways (comic was written in 1986) amidst the tale end of the cold-war, Russia/USA nuclear standoff and so on. The cynicism in the Watchmen story goes into overdrive and reiterated, via motion picture, in a overindulgent way. The outcome? If the movie was released in the late 80's then you could relate to the story, otherwise there isn't much there than mindless entertainment for 2 and a bit hrs (even that stretches the patience). Suffice to say, there is one scene that I like, which is the first scene with a washed up ex-superhero called The Comedian in his apartment when an assassin attacks him.

morbius glass quote of the month – September 2009

"It's a joke. It's all a joke..."

(The Comedian after getting the crapola kicked out of him, referring to the state of the world and his invertible end)

Watch the youtube footage of this scene, it's a fucking stella scene. Enjoy:

Click here for the scene

US dollar selling and the Oil price

Probably one of the most obvious inflation (apart from gold) indicators from US dollar weakness is the upward moving oil price.

And what a divergence...

Deadpool 'Dawn of the Dead' homage

Deadpool is pretty much the only comic I am reading at the moment, it's a blast. Daniel Way (writer) is doing his thing with the other Deadpool run and Victor Gischler is handling this one. It's a funny comic with bizarre situations. A zombified Deadpool head from another reality teams up with Deadpool (the whole one). So it's a Deadpool forumla, that being his trademark split personalities (including the zombie Deadpool head) and now a sexy sidekick (she aint into him though...) in tow.

Anyway above is the Deadpool homage (cover by Arthur Suydam) to one of the most legendary zombie movies in history Dawn of the Dead - the original. Also check my The morbius glass schlock, horror, 80’s, grindhouse, sex and violence movie marathon. Dawn of The Dead (1977) George A Romero

'Tall Girls Unite' - via Vice Magazine

Ok, there is a kinda an expected outcome with tall girl and short guy dating, usually it doesn't work out...or maybe it does, who knows I mean the statistics are shaky on that one. Anyway if you are interested Vice Magazine have a 'tongue and cheek' not to serious take on the taller woman and their take on being tall and it's ramifications for life, love and happiness (in an interview style-condensed-observation).

Vice magazine for the article/interview

"Some fires are best left to burn out" By William White for Financial Times

Exert below is from a very good article written by By William White for FT, full article here

"What needs reflection, against this backdrop, is whether the policy reaction to each successive set of difficulties laid the foundations for the next one. Worse, the encouragement by lower interest rates of debt accumulation and spending imbalances was the equivalent of undergrowth accumulating in the forest. This undergrowth not only made subsequent downturns more dangerous; it also made the available policy instruments less reliable in response. Looking back over successive cycles, interest rates have had to be reduced with ever more vigour to get the same (and sometimes reduced) response from spending. Most recently, new and untried policies such as quantitative and credit easing have had to be introduced. Logically, the end point of such a dynamic process would seem to be the mother of all fires and few if any means of resistance."

Recessionomics - update 6. The end of 'Recessionomics' blog posts, price deflation on LCD's and economic collapse.

With the global recession ending (on short term fiscal and monetary stimulus measures) and GDP being at the best of times dubious measure of economic output. Morbius glass Recessionomics may not have the same ring to it when previously we were all sitting in 'official' negative growth. So this blog post may be the last under 'recessionomics' (unless a 'double' dip happens, that being a W - more likely an M), although the next title maybe called tumult-onomics (as in tumultuous economics here after) at some point.

To celebrate the possible end of 'recessionomics' blog posts on morbius glass I feel it is fitting to explain the grossly hysterical observation of deflation (Keynesian); which unfortunately is so out of date that their (interventionist economics) deflation models overly exaggerates deflation pressures by adding technological deflation which is normal price deflation on newer technology replacing older technology. The miscalculation? Well just refer to the the amount of liquidity sloshing around (this can be seen in recent stock rallies) is very good indication of over use of monetary stimulus and/or 0% interest rates. So when they (governments and central banks) try and underpin prices, including those that will always fall (technology), they create the only scenario that is left; inflation based economic collapse (don't worry the Doom'ers are starting to get press now)

A good example is flat screen LCD's, (remember 6 years back when they were $7,000 to $10,000 for a plasma flat-screen!!!). The average new price is between $2,000 and $3,000, but once a new LCD hit's the market for that price it quickly drops.

refer to the price graph for a Sony Bravia KDL46XBR9 46" LCD HDTV :



So natural deflation occurs in the 21st century on the back of technology, in the old days say 1930's when it was old analogue phone , it held it's price better and deflation concerns were based on wage and general price deflation.

But we are gonna have a lot more price inflation just refer to the USD and oil charts (I'll post them later) thanks to a fuck up with deflation modeling.

Can the US dollar find strength?...Maybe on a trade 'war'

As mentioned in The USD will only recover if China's economy collapses or there is a major war., the only aspect that will drive a USD upward is some sought of risk averse event. China's economic data released on 10/09/2009 the caused the USD to tank on the same day. So a correlation is becoming more evident that the more a stronger economy diversifies out of USD reserves the more it will effect the purchasing power of the USD. So the only thing that can change total USD selling is if both the Japanese and Chinese economies absolutely collapse, or a major conflict occurs.

The next best thing? A nice little trade war...and it seems to be beginning between China and the USA:

Sept. 14 (Bloomberg) -- China announced a probe into the alleged dumping of American auto and chicken products, two days after U.S. President Barack Obama imposed tariffs on imports of tires from the Asian nation.

Chinese industries have complained that they’re being hurt by “unfair trade practices,” the nation’s Ministry of Commerce said on its Web site yesterday. The Beijing-based ministry is also looking into subsidies for the products, it said. It didn’t specify the imports’ value.

The European Central Bank said last week that rising protectionism may hamper world trade and undermine the global economy’s recovery from recession. The U.S. placed tariffs starting at 35 percent on $1.8 billion of tire imports from China, backing a United Steelworkers union complaint against the second-largest U.S. trading partner.

This is country to country survivalism. One thing that should be noted the more the USD is sold off the more friction it will put on export countries and trade, particularly commodity and Asian exports. As the currency's value of export nations is driven upward against the USD. China is trying to recover from a recession and it wants cheap imports, but against the US dollar commodity currencies are expensive therefore their 'goods' (exports) are expensive.

Now if you insert trade protectionism into the equation...then we are in a world of hurt.

So there is a lot of ripples unfolding even with the global ecomomy stabilizing.

It's a shame academic economists didn't study anthropology, human nature and psychology, sociology.

Samurai Princess DVD cover

Samurai Princess from the people that made Machine Girl (if you haven't seen that flick go get the DVD...bizarro Japanese gore and action).

No, I haven't seen this movie yet, but it's a Japanese production company that has a blast making these movies. In a true grind house tradition. It's gonna be fun.

The USD will only recover if China's economy collapses or there is a major war.

* China Aug Retail Sales plus 15.4% on Year up from 15.2% in July
* China Aug Industrial Output up 12.3% on year; plus 12% expected.
* China Aug New Loans CNY 410.4 BLN up from 355.9 BLN in July
* China Aug Consumer Prices -1.2% On Year Ago (F'cast -1.3%)
* China Aug Producer Prices -7.9% On Year Ago (F'cast -8.0%)
* China Jan-Aug Urban Fixed-Asset Investment +33.0% On Yr (F'cast 32.5%)
* China Jan-Aug Exports -22.2% On Year Ago
* China Jan-Aug Imports -22.7% On Year Earlier
* China Jan-Aug Trade Surplus $122.8Bln
* China Aug Exports Seasonally Adjusted Up 3.4% from July
* China Aug Imports Seasonally Adjusted Up 1.0% from July
* China Aug Imports, Exports Seasonally Adjusted Year-On-Year Unchanged
* China Aug Trade Surplus about $15bln (F'cast $12.90bln) -Reuters Calculation
* China Aug Exports About -23% On Yr (F'cast -19.6%) -Reuters Calculation
* China Aug Imports About -17% On Yr (F'cast -10.0%) -Reuters Calculation

As soon as the above figures were released today September 11th 2009 the USD tanked (refer below USD mth graph)

The only way the US dollar can recover is if China's economy collapses, war or some other global panic. Otherwise the USD is truly toast. As for equities, they may still rally (indefinitely) only correcting on something major.

US stocks are now 'phenomenally' overbought

Particularly the Dow.

Thin volumes and stocks are trading way out of their narrow trading ranges, this low level of trading volume is reminiscent of August 28th 2008 when the Dow starting to sell off that took the index to it's 10th October 2008 lows. Yet market speculation is rife thus adding to stock gains, but the divergence between the OBV (on balance volume) and volume is astounding. A pull back is guaranteed, how significant depends on 'worst' news, or the Dow falls back into it's trading ranges. But money has left stocks and now sits in safe havens such as gold.

(Note on the graph the large spike in Volume on 8th July 2009 which was the beginning of the market rally.)



The liquidity support argument is relevant regarding stock gains. Also the holding '0% rate US dollars leads to market speculation' argument is relevant. Both would answer the reason why stock gains have been so significant. Yet the market is still cautious and the level of 'smart' money is being pulled out of stocks and is ending up between gold, oil and Treasuries.

The ultimate question is when will there be a correction and how significant will the correction be; at this point we can only say the market is so overbought a due correction is a no brainier.

Australia caught in unemployment spiral crunch

Noam Chomsky once said that the truth can be found in all aspects of the media. It somehow comes through, even from tabloid publications and the like.

Governments and their statistical bodies do fudge numbers. You expect that in the markets, as goverment self interest and political gain tends to be paramount over truth. But sometimes the truth is just to strong to hold down as the obvious becomes more pronounced.

The Australian goverment is playing a precarious game of number fudging, 1. they want to ensure (to their voters) that their fiscal stimulus has encouraged employment, 2. they want to protect the mortgage belts and union originated sector by attempting to keep interest rates low. 3 they want to gradually shut down the overseas student intake which in turn frees up jobs (low wage) that students do whilst they study here.

In order for them to do this they need to balance statistics. The Australian unemployment rate is most probably well over 5.8% more so in the rage of 7-8%. Although the August unemployment numbers stand at 30,800 K, the market was expecting a low number (12,500). Yet the overall rate of change stays at 5.8%. This would indicate that the figure is most likely higher, yet the ABS decided to keep the range flat (5.8%) by revising the previous month figure, but couldn't deny that August 2009 did shed a large number, hence the figure that was released (30,800) for the month of August. In other words they (ABS) are trying to smooth out the figures.

This of course creates volatility in the market and eventually a backlash against the goverment come next election. Their hope, or bet? Is the US coming back online, Asia exports picking up and a sharp V recovery in 2010.

This will not happen.

Morbius Glass store - The Private Collection Box: 1970-1979 (Paperback)

C'mon the 'birth' of magazine hardcore came out of Europe...and it was born in Sweden! This is going to be fascinating box set. Tachen have done it again by digging deep into the history of popular culture and sex.

Remember this was a time (ok I was just kid in this period of 1970-1979 but hey we knew dad had a stash of these, right?) before the absolute saturation of sex and media in the 21st century. What ever the moral standpoint of what was considered a 'golden' time for porn and erotica (if it ever existed), the point is the historic titillation that will come (pun) from this purchase.

Gold futures at $1000.00

$1000.00

Stocks rallying on air...and company mergers

...that's all.

Volumes are thin and liquidity is tightening.

Awaiting correction; like most of the market.

Gold price breakout on a 'mini' crisis 2009 (update 1) - Gold has broken out

As discussed in Gold price breakout on a 'mini' crisis 2009. The Gold price had the potential of a breakout from 965.30 which it did on the 3rd September 2009 moving right up to 997.30. Technically gold has been trading very static with low volatility, refer to the Average True range in which gold that has been scraping along under the 14 ATR; with possible exit point/s of 14.43 (ATR) on the 5 and 14 day settings. What that means is that gold is showing low signs of volatility and some profit taking will occur. Still if gold corrects on the downside it should find support on the 50 day average at 944

Gold is currently trading at 991 in Asian trade:


Of course in daily trading there are take profit and stop loss triggers, otherwise gold is holding well under the concern of a possible crisis brewing (and it may not be a 'mini one'). This 'crisis' could be the commercial property market more so the trades in commercial mortgage backed securities. Think sub-prime residential mortgages and prime mortgages (mortgage backed securities meltdown/losses etc) which was the cause for the first credit crisis, that than lead us into the global recession. But add to that thought that the commercial property markets are in every city in the world. All extremely leveraged and all connected to the CMBS market. As the construction boom with commercial property occurred from Dubai, London, Shanghai, Honk Kong, Melbourne, Sydney, New York; so the CBMS market is huge in comparison to the MBS market. So if commercial property values continue to drop, which they are, at some point near term losses will accumulate on balance sheets (if they haven't already in major way). Until banking analysts start to make calls on bank write downs in 2009 and into 2010 from CMBS losses, the market will continue to feel uneasy.

*morbius glass doesn't give investment advice, trade at your own risk

A side note: I have been directly involved with negotiating rent with a big international real estate company. The building which I work in has vacant floors on 7 levels. We were able to get a substantial rent reduction. Prior to us negotiating other agents were literally throwing vacant office spaces at us at ridicules low rents. That is just an example.

Recessionomics - update 5. Recession, violence and the ugly stick

Ok I am not one of those alarmist 'run to the hill' guys, in fact I like living in the city. But life is fraught with violence that is why I train in Krav Maga and other 'reality' martial arts. How does a recession effect violence in society? Well of course muggings and theft occur more so when money is tight. But also the sad and unfortunate aspect of economic recessions is the increase of violence against women and children.

So rather than be hyper-vigilant against potential muggers and the like, which I think is counter productive, it is wise to be vigilant especially at home. Not to say you should arm yourself to the teeth, but maybe one of these (above picture) could come in handy (depending where you keep it). Produced by a company called Cold Steel, they manufacture knifes, batons and other defensive weapons. But the Brooklyn Crusher caught my eye, yes not only does it sound cool, looks cool too! Apparently almost indestructible, this baseball bat (somehow I doubt you will be playing baseball with this) is the perfect intruder repellent.

Australia learns from China the art of massaging GDP figures

You know it all sounds strange as GDP figures are fudged via government statisticians ( Australian Bureau of Statistics) when they tell the market that a rise of 0.4% (q1) to 0.6% (q2) of GDP occurred. The problem is 2 days before the release of the 'current' GDP figure, the ABS released the Balance of Payments and International Investment Position for Australia and it wasn't rosy.

From the ABS:

Exports of non-rural goods, in seasonally adjusted terms at current prices, fell $8,061m (18%) to $36,394m, with volumes up 4% and prices down 21%. All components contributed to this fall in rural goods, with the largest decreases in:

• coal, coke and briquettes, down $3,295m (26%), with volumes up 17% and prices down 37%
• metal ores and minerals, down $2,768m (21%), with volumes up 6% and prices down 25%
• other mineral fuels, down $883m (18%), with prices down 18%
• transport equipment, down $412m (36%), with volumes down 31% and prices down 8%.

So overall:

The turnaround in the goods surplus resulted from the decrease in goods credits (exports), down $11,156m (19%) exceeding the decrease in goods debits (imports), down $4,873m (9%)

To finish (from the ABS themselves)

In seasonally adjusted chain volume terms there was an increase of $683m (36%) in the deficit on goods and services. This is expected to detract 0.2 percentage points to growth in the June quarter 2009 volume measure of GDP.

Then the market get's this (?):



In reality Australia's growth with it's widening trade deficit is more likely sitting below 0% of GDP. We have to remember that despite imports on the plus side, with exports weakening to the point of a collapse. The nations income decreases, therefore it's debt levels increase. So with government stimulus and cash handouts which over encouraged import consumption (from a stronger AUD). Not only is there now an imbalance in trade mixed with a nonsensical GDP number. Overcapacity from imports may cause deflation markdown on prices, since we won't have the income to purchase (exports credits gone)

A barely functioning economy.

Not to forget that China is famous for fudging their GDP (apart from Argentina playing around their inflation numbers); please look at this great article from the Economist re China's GDP. Click here for article. Then you'll see how capable a main trading partner of China can join the game of making up numbers. It's all politics and bullshit.

The Australian stock market market didn't buy the GDP numbers, market (All Ords) was down -74.7 when GDP was released on September 2nd 2009.