Australia & NZ Archives - Page 47 of 96

June 27, 2014

Bank of England throws egg all over RBA, APRA | | MacroBusiness

Of all of the financial systems in the world, Australia’s is most similar to the UK. Of all of the restrictive housing planning systems in the world, Australia’s is most similar to the UK. Of all of the house price boom and bust cycles in the world, Australia’s is most similar to the UK. The Bank of England also practices inflation targeting though its cap is 2%. The UK and Australia share a similar economic model reliant upon external borrowing to fund consumption and low export-to-GDP ratios but the main difference is that the UK economy is a more diverse mix of value-adding sectors with a much higher contribution from manufacturing.

But today there is one very new difference. The UK has announced it will henceforth practice macroprudential regulation to control its housing cycles and prevent them from hollowing out the economy…..

June 26, 2014

ASX 200 still plagued by indecision

The ASX 200 found support at 5380/5400. Recovery above 5470 would break the descending trendline, suggesting that the correction is over — and a test of resistance at 5540/5560 likely. But 21-day Twiggs Money Flow whipsawing around zero indicates indecision. Respect of (or a false break above) 5470 would suggest correction to 5300.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX making new lows, however, indicates a bull market.

ASX 200

June 26, 2014

Aussie Dollar threatens breakout, Euro tests support

The Aussie Dollar continues to test resistance at $0.94. Recovery of 13-week Twiggs Momentum above zero suggests continuation of the up-trend, testing resistance at $0.97. Reversal below $0.92 is unlikely at present, but would warn of a decline to the band of support between $0.87 and $0.89.

Aussie Dollar

The Euro respected primary support at $1.35 and the rising long-term trendline. Recovery above $1.37 would suggest a rally to $1.39/$1.40, but descending 13-week Twiggs Momentum crossed below zero, warning of weakness. Breach of $1.35 would signal a decline to $1.31*.

Euro/USD

* Target calculation: 1.35 – ( 1.39 – 1.35 ) = 1.31

June 23, 2014

ASX 200 rallies

The ASX 200 rallied on Monday, but 21-day Twiggs Money Flow at zero indicates (medium-term) buying pressure is weak. Follow-through above 5470 would signal a test of resistance at 5540/5560, but China continues to weigh on the index and reversal below 5380 would warn of a test of 5300.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX making new lows is indicative of a bull market.

ASX 200

June 22, 2014

“Highly unlikely to ever see a Storm again”

Andrew Starke welcomes the latest proposed changes to Future of Financial Advice (FoFA) legislation in FINSIA News:

Changes… outlined by the government on Friday have generally been well received, with many in the industry now hoping for final clarity on a process that has been running since the Labor Government revealed the proposed reform package in April 2011…..First and foremost, the changes outlined by the government on Friday ensure a clear ban on commissions after it had previously left the door open via the so-called ‘Wolf of Wall Street’ clause within general advice. Any possibility of a return to commissions on investments or superannuation products has now been ended.“This response removes all doubt that commissions will be introduced in the provision of general advice. The government will define and ban commissions in black letter law” said John Brogden, CEO of the Financial Services Council FSC. “The changes outlined by the government also maintain a detailed and comprehensive best interest duty requiring a financial adviser to act in the best interests of their client.”

Best interest clarified
While the perceived watering down of the best interest duty has attracted a great deal of attention in the mainstream press, Brogden said this should be put in perspective. Prior to FoFA, financial advisers simply had to offer ‘appropriate advice’ while they now need to comply with a raft of regulation. “There are six separate duties in the Corporations Act that require a financial adviser to act in the best interests of their client. In addition, there are six specific steps that must be met by an adviser when providing advice that codifies the best interest duty,” Brogden said. “The government has made one minor change to the best interest duty by removing an unnecessary ‘catch all’ provision. This change will actually clarify the best interest duty and remove any ambiguity for a financial adviser to always act in a client’s best interests.” The FSC has legal advice from leading commercial counsels Ian Jackman SC and Gregory Drew which it said confirms that the removal of ambiguous ‘catch-all’ phrase will not dilute the obligation of an adviser to act in the best interest of their client……The Australian Bankers’ Association ABA also welcomed the announcement and said the amendments would preserve the original intent of the law while correcting the current overreach and broader uncertainties.

What puzzles me is:

How an overriding provision — that advisers act in the best interests of their clients — can be “ambiguous”?
How removal of the overriding provision helps to clarify the situation? and
Why, if legal advice confirms that removal of the ‘catch-all’ phrase “will not dilute the obligation of an adviser to act in the best interest of their client”, should it be removed?

Major banks have spent billions of dollars buying up financial planning firms in order to secure distribution of their investment products. Christopher Joye at AFR puts it in a nutshell:

The big vertically integrated institutions (mainly the four majors and AMP), which now control 70 per cent of planners, want these tied distributors to have the freedom to recommend in-house platforms, super funds and investments without being hampered by a catch-all best interests duty.

An overriding provision would certainly not be in the banks’ best interests.

June 20, 2014

A good week for the S&P 500 but not the ASX

Summary:

Good week for US markets.
China continues to threaten further down-side.
The ASX 200, pulled in opposite directions, is range bound for the present.
Momentum strategies require persistence.

The S&P 500 broke through 1950 and is expected to test the next resistance level at 2000*. Rising 21-day Twiggs Money Flow signals medium-term buying pressure. Reversal below 1925 is unlikely at present but would warn of a correction.

S&P 500

* Target calculation: 1900 + ( 1900 – 1800 ) = 2000

The CBOE Volatility Index (VIX) continues its downward path, indicating low risk typical of a bull market.

S&P 500 VIX

The Shanghai Composite Index rebounded Friday after a tough week and continues to test primary support at 1990/2000. Breach of support would signal a decline to 1850*. 21-Day Twiggs Money Flow oscillating above zero indicates buying support; a fall below zero would suggest selling pressure. The primary trend is expected to continue its downward path, but this is a managed descent and an abrupt fall seems unlikely.

Shanghai Composite

* Target calculation: 2000 – ( 2150 – 2000 ) = 1850

After a strong surge on Thursday the ASX 200 retreated below 5450 on Friday, suggesting another test of support at 5400. Reversal of 21-day Twiggs Money Flow below zero indicates medium-term selling pressure. Breach of support is likely and would indicate a correction to 5300. Recovery above 5500 is unlikely at present, but the long-term trend remains upward.

ASX 200

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

Resist the urge to avoid discomfort

Momentum stocks have suffered a fair degree of turbulence since April, after a strong first quarter. Investors unfortunately have to endure periods like this, when the market appears hesitant or lacks direction, in much the same the same way as travelers can expect turbulence during an air flight. It is important is to resist the urge to avoid discomfort by exiting positions. Enduring uncomfortable parts of the journey are necessary if you want to reach your intended destination. Our research on both the ASX and S&P 500 has shown that attempting to time secondary movements in the markets does not enhance but erodes performance: the average (re-)entry price is higher than the average exit price after accounting for brokerage.

A basic rule of thumb in investing is that investors need to endure higher volatility in order to achieve higher returns. If your investment time frame is long-term, it is important to focus on the end result and not be overly concerned by weekly fluctuations.

June 16, 2014April 18, 2024

ASX 200 tests support

The ASX 200 is testing medium-term support at 5400. Long tails and recovery of 21-day Twiggs Money Flow above zero signal buying pressure. A close below 5400 would warn of a test of 5300, while recovery above 5460 would suggest another attempt at 5550.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

While not as strong as North American markets, the weekly index has maintained a healthy distance above a green Ichimoku Cloud. There are no signs of a long-term trend reversal.

ASX 200

ASX 200 VIX is also holding at low levels indicative of a bull market.

ASX 200

June 12, 2014

ASX 200 weakens but Aussie dollar strengthens

Aussie dollar strengthens.
Stocks weaken.
But ASX 200 VIX continues to indicate a bull market.

The Aussie Dollar is testing resistance at $0.94. Consolidation in a narrow band suggests continuation of the rally towards $0.97/$0.98. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend, but we may see the RBA intervene to prevent this. They may need to follow the RBNZ, introducing macro-prudential controls (e.g. setting a maximum 80% LVR percentage), to take the steam out of the housing market while lowering interest rates to weaken the currency.

Aussie Dollar

The ASX 200 respected resistance at 5500 and is headed for a test of medium-term support at 5400. Reversal of 21-day Twiggs Money Flow below zero warns of medium-term selling pressure and a correction. Breach of 5400 is likely and would test support at 5300 and the rising trendline. Respect of 5400 is unlikely, but would suggest another rally to 5550.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX below 12, however, continues to indicate low risk typical of a bull market.

ASX 200

June 9, 2014

Creating a Learning Society | Joseph Stiglitz | Project Syndicate

By Joseph Stiglitz:

The Nobel laureate economist Robert Solow noted some 60 years ago that rising incomes should largely be attributed not to capital accumulation, but to technological progress – to learning how to do things better. While some of the productivity increase reflects the impact of dramatic discoveries, much of it has been due to small, incremental changes. And, if that is the case, it makes sense to focus attention on how societies learn, and what can be done to promote learning – including learning how to learn.

Stiglitz also includes an observation particularly relevant to Australia, with its shrinking manufacturing sector.

The great economist Kenneth Arrow emphasized the importance of learning by doing. The only way to learn what is required for industrial growth, for example, is to have industry. And that may require ….ensuring that one’s exchange rate is competitive….

June 3, 2014

ASX 200 retreats

The ASX 200 closed below short-term support at 5500, warning of another test of support at 5400. Declining 21-day Twiggs Money Flow indicates short-term selling pressure. Breakout above 5550 is unlikely in the short-term, but would signal an advance to 5700*.

ASX 200

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX below 12 indicates low risk typical of a bull market.

ASX 200