Chart on Australian 10 year bonds

Observe the extraordinary decline in yield of the Australian Government 10 year bond in the chart below:

After peaking around 16% in 1982, the yield has been in long term decline, interrupted by the savage bond bear market of 1994. The decline in bond yield has been largely the result of a structural decline in global inflation. At least, this was the explanation until the last few years. Over the last 10 years, the bond rate has averaged 5.5%. But since the onset of the GFC in 2008, we have seen record new lows, culminating in the present rate of 3.25%. This is extremely low, even compared with the current official cash rate of 3.75%, creating an inverse yield curve – usually a predictor of a slowing economy.

(more…)

Article contains no comments. Read or leave a comment.

Greek drama gets nerves jangling … again

Once again, events in the eurozone are assailing investors’ confidence and causing them to flee share markets for the apparent safety of the US dollar and US government bonds.

Greece is headed for a fresh general election after political leaders failed to agree on a proposal by the country’s president to form a technocratic government with a limited mandate. Greek President Karolos Papoulias has been meeting with political leaders this week after the inconclusive election on 6 May failed to produce a government. A second election threatens to extend the country’s political gridlock and has reignited speculation Greece will renege on its pledges to cut spending, required by the terms of its 240 billion euros in bailouts. This suggests Europe’s sovereign-debt crisis will worsen.

(more…)

Article contains no comments. Read or leave a comment.

Australia’s unemployment rate falls to 4.9% in April 2012

Australia’s seasonally adjusted unemployment rate decreased 0.2 % to 4.9% in April, as announced by the ABS today. There was also a decrease in the labour force participation rate of 0.1% to 65.2%.

The number of people employed increased by 15,500 to 11,501,000 in April. The increase in employment was driven by increased part-time employment, up 26,000 people, and was offset by a decrease in full-time employment, down 10,500. The increase in employment was mainly driven by an increase in male part-time employment.

(more…)

Article contains no comments. Read or leave a comment.

RBA cuts by 50bp!

Somewhat surprising the market, the Reserve Bank has cut official cash rates by 50 basis points, from 4.25% to 3.75%. The market expected the rate cut to be the usual 25 basis points. Clearly recent growth data has disappointed, and inflation data was well below expectations.

(more…)

Article contains no comments. Read or leave a comment.

A review of recent past and our outlook

Based on a letter to our investors from John Abernethy. March Quarter

During September last year, markets were capitulating under a weight of worry flowing from a potential default by Greece plus the deteriorating fiscal positions of both Italy and Spain. There were more concerns in October when the German Administration “seemed” determined to stop the implementation of quantitative easing in Europe.

(more…)

Article contains no comments. Read or leave a comment.

Australia’s unemployment rate remains steady at 5.2%

Australia’s seasonally adjusted unemployment rate remained steady at 5.2% in March, as announced by the ABS today.

(more…)

Article contains no comments. Read or leave a comment.

OECD Leading Economic Indicator turns up

While investors will quite naturally be worried about many unresolved issues in the global economy – not least the latest drama emanating from Spain’s problems juggling austerity programs with unemployment at catastrophic levels and rising borrowing costs – take a moment to look at a more promising chart.

(more…)

Article contains no comments. Read or leave a comment.

Disappointing job numbers out of the US

Hiring by American employers disappointed in March, causing investors to worry that the US recovery might be stalling. The 120,000 increase in payrolls was the smallest in five months and falling well below expectations of a 205,000 increase.

(more…)

Article contains no comments. Read or leave a comment.

More on US housing

Great chart showing the extent of the US housing boom and bust. The chart shows the US median home price expressed as a percentage of average annual per capita disposable income. From a peak of 7 times, the US median home price is down to just 4.5 times average annual disposable income – down to its cheapest level in 40 years.

(more…)

Article contains no comments. Read or leave a comment.

Where the growth is, and isn’t

See this interesting chart from Agora Financial, showing the percentage change in wealth per person, from the period first quarter of 2007 to second quarter of 2011. China and India are the clear winners, Greece and Ireland the losers. Fortunately Australia is in marginally positive territory!

(more…)

Article contains no comments. Read or leave a comment.

Saudi Arabia’s take on oil prices

On 28 March, Saudi Arabia’s oil minister, Ali Naimi, wrote an interesting op-ed piece in the Financial Times which is worthwhile reading in full. As Naimi states, “High international oil prices are bad news. Bad for Europe, bad for the US, bad for emerging economies and bad for the world’s poorest nations. A period of prolonged high prices is bad for all oil producing nations, including Saudi Arabia, and they are bad news for the energy industry more widely.”

(more…)

Article contains no comments. Read or leave a comment.

The “Fear Index” on the way down

VIX is the market code for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of the S&P 500 index options. Often referred to as the fear index, it represents one measure of the market’s expectation of stock market volatility over the next 30 day period. Here is the chart over the last 5 years, showing a sharp decline in the VIX since September last year as market confidence recovers.

(more…)

Article contains no comments. Read or leave a comment.