Can we talk about the Australian economy for just a moment today? First, some nitpicking. Today’s Australian has a headline that reads, “Credit card debt slows to 13-year low.” That would lead you to believe that something good has happened in the economy. But has it?
“Who is the predator and who is the prey? That is what we wonder today.”
“Is China preying on BHP Billiton (ASX: BHP)? Or is BHP preying on Rio? Who are the barracudas and who are the minnows?” asks Dan Denning of the Daily Reckoning Australia.
Steel prices are up by about 10% this year already.
There’s nothing like starting your week with a kick to the guts. The Aussie market was doomed before trading began today with Friday’s shock result by GE in New York. But it’s the collapse of yet another Australian broker, Lift Capital and its 1,600 clients, which threatens to swamp the Aussie market this week.
Gee a lot can change in a day. Before we get to the energy, Australia’s manufacturing future, and just where the biggest mob of drongos is, a quick word about the BHP, Rio Tinto, China love triangle.
About a year ago, my father asked if the Merrill Lynch bond he was thinking of investing in was okay. I looked it over … noted its high rating … and said sure. A little less than a year ago, I was speaking to a vice president of Bank of Nova Scotia. I was asking him about the bank’s exposure to the subprime crisis. He said it was negligible.
What a strange economy Australia has. A country in the midst of a record boom still manages to run a trade deficit. Yesterday, the Australian Bureau of Statistics reported that the February trade deficit blew out by 30%, from a revised $2.59 billion in January to $3.29 billion in February.
It seems like just another Monday. But the world always changes a little over the weekend. And this weekend, we reckon it changed a lot. The Opes story dominates the headlines. But the collapse of margin lending and leverage probably isn’t the biggest story this week. It’s the increase in food and energy prices we have our eye on this week.
The global wise men of asset prices and capital flows have weighed in on Aussie house prices. They have been found overvalued. Crikey. Hey, you can’t say we’re being knee-jerk bears on this one.
We have good news for Australia. Earnings are going up for some companies! Rising resource prices for tangibles like coal, iron ore, and gold should continue to generate earnings growth for Aussie exporters. It’s true that energy costs are rising for Aussie producers and the strong local dollar puts a dent in earnings.
We promised yesterday to review for you the Reserve Bank’s Financial Stability Review, published late Thursday. It is a more daunting task than we imagined. So we are going to do the hard yards this weekend, when we have a bit more time to pore over the data on Australian housing.