Category: Australia & NZ

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ASX 200: Large caps strong while small caps decline

The ASX 200 continues to test support at 4980/5000 on the weekly chart. Breakout above 5100 would offer a medium-term target of 5500*. Rising 13-week Twiggs Money Flow indicates strong buying pressure. Reversal below 4980 is unlikely but would warn of a correction.
ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4500 ) = 5500

ASX small-caps are still doing badly, with the ASX 50 [$XFL] out-performing the $XSO (ASX Small Ords) by a substantial margin. The opposite of what one would expect in a bull market: treat it as a caution. The current $XSO down-swing should test the lower channel at 2300, presenting a buy opportunity for swing traders.

ASX 200 Index

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Rate cuts: Short-term benefit, long-term pain

Shane Oliver at AMP recently tweeted:

Why rate cuts help household spending: 1/ Aust hholds have approx $750bn in deposits but $1700bn in debt….

…so a 1% rate cuts makes depositors $7.5bn worse off, but borrowers $17bn better off. The net gain for households is $9.5b !

Reason #2 as to why rate cuts help. Depositors r less likely to change spending on rate changes than borrowers (families with mortgage)

He is right that rate cuts stimulate household spending, but that is not the only consideration. Rate cuts also stimulate borrowing and expansion of the money supply — leading to asset bubbles and inflation. They further force savers/investors to take greater risks in the scramble for yield, leaving them exposed if the bubble collapses. If only we could let market forces of credit supply and demand determine the rate — and resist the urge to tinker.

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John Howard interview: Assault weapons are a public safety issue not a left/right issue [video]

http://youtu.be/_CbkKYdWiS0

John Howard, the conservative former prime minister of Australia, says that pro-gun advocates in the United States are wrong to oppose an assault weapons ban like the one he pushed for after a 1996 mass shooting because public safety is not a “liberal/conservative issue.”

Howard told CNN’s Fareed Zakaria that he felt “horror and shock” after a gunman killed 35 people in Tasmania on April 28, 1996.

Many within his own party opposed the newly-elected PM when he proposed a ban on private ownership of assault weapons in Australia. But statistics since then have proved him right. According to CNN, in the 18 years leading up to 1996 there were 13 gun massacres in Australia; since 1996 when the law was passed there has not been a single incident.

Published on 17 Feb 2013

P.S. Gun ownership is an emotive issue in the US. We encourage open considered debate but believe that nothing is gained by people “shouting” at each other. Any emotive posts of that ilk will end up in the trash can.

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In support of land taxes

Thanks to Alex Fletcher who submitted this as a comment:

From a purist point of view I believe Geolibertarianism is the moral philosophy that should guide taxation:-

“Geolibertarians are advocates of geoism, which is the position that all natural resources – most importantly land – are common assets to which all individuals have an equal right to access; therefore, individuals must pay rent to the community if they claim land as their private property. Rent need not be paid for the mere use of land, but only for the right to exclude others from that land, and for the protection of one’s title by government. They simultaneously agree with the libertarian position that each individual has an exclusive right to the fruits of his or her labor as their private property, as opposed to this product being owned collectively by society or the community, and that ‘one’s labor, wages, and the products of labor’ should not be taxed.”

In reality though it is about what is practically possible. The Henry review [in Australia] aimed for four bases – personal income, business income, consumption and economic rents of natural resources and land. At present land tax has a much smaller role than the other three.

Any change to increase the proportion of total taxation from LVT can only be achieved slowly and with much opposition. The ACT proposal to change existing property taxes and stamp duty to an annual LVT is the best start one can hope for. The plan is such that if a landowner really wants to keep stamp duty instead of an annual fee they can virtually do so. There was an article in The Drum about it.

I believe GST is more efficient than income tax and in that context may be better. However if, as geonomics asserts, the main contributor to unemployment is that land is priced out of reach, increasing the GST and broadening the base without a broad-based LVT as well, would not abolish unemployment and so would increase hardship for the very poor.

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Australia: Interview with Hawke & Howard

Ray Martin’s interview with former PM’s Bob Hawke and John Howard, November 2012

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Australia: How much do I need to retire at 60? | MYOB Blog

Liam Shorte writes:

A common rule of thumb is that if you want to retire at 60, you will need about 15 times the amount you have calculated for your annual after-tax retirement expenses. So if you estimate $60,000 per year then you will need $900,000…..According to the latest data for September 2012, in general, a couple looking to achieve a comfortable retirement needs to spend $56,236 a year, while those seeking a ‘modest’ retirement lifestyle need to spend $32,511 a year….. The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household.

Read more at How much do I need to retire at 60? | MYOB Blog.

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Forex: Euro and Sterling retreat while Aussie Dollar rebounds

The euro broke medium-term support at $1.32 and the rising trendline against the greenback. While this indicates trend weakness it does not necessarily mean reversal to a primary down-trend. Completion of a 63-day Twiggs Momentum trough above zero would suggest that the trend is intact — and an advance to $1.42* is on the cards.
Aussie Dollar/USD

* Target calculation: 1.36 + ( 1.36 – 1.30 ) = 1.42

Pound sterling broke long-term support at $1.53 against the greenback, offering a long-term target of $1.43*. Fall of 63-day Twiggs Momentum below -5% (its 2011 low) would strengthen the signal.
Aussie Dollar/USD

* Target calculation: 1.53 – ( 1.63 – 1.53 ) = 1.43

Against the euro, the pound is testing support at €1.15. 63-day Twiggs Momentum well below zero suggests a strong down-trend. Failure of support would offer a target of the 2011 low at €1.10.
Aussie Dollar/USD

The Aussie Dollar respected primary support at $1.015. Recovery above $1.03 and the declining trendline would suggest another rally to test $1.06. Reversal below $1.02 would warn that primary support is under threat.

Aussie Dollar/USD
Failure of primary support would offer a target of $0.96*. Oscillation of 63-day Twiggs Momentum close to zero, however, suggests a ranging market.
Aussie Dollar/USD

* Target calculation: 1.01 – ( 1.06 – 1.01 ) = 0.96

The Canadian Loonie by contrast is in a strong primary down-trend against the greenback, headed for a test of $0.96. Falling 63-day Twiggs Momentum suggests that medium-term support at $0.97/$0.98 is unlikely to hold.
Aussie Dollar/USD
The US dollar has broken its long-term declining trendline against the Japanese Yen, suggesting that the 30-year decline is over and the greenback likely to appreciate for the foreseeable future. Follow-through above ¥100 would confirm, offering a target of ¥120*.
Aussie Dollar/USD

* Target calculation: 100 – ( 100 – 80 ) = 120

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ASX 200: Small caps warning

The ASX 200 is headed for another test of resistance at 5100 on the hourly chart. Breakout would signal continuation of the primary advance. Reversal below 5050, however, would indicate another test of 5000.
ASX 200 Index
The monthly chart shows strong momentum but retracement to test the new support level of 5000 is likely in the weekly (if not monthly) time frame. Respect of support on the weekly chart would confirm a primary advance with a long-term target of 6000*.
ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4000 ) = 6000

ASX small-caps are still doing badly, with the ASX 50 [$XFL] out-performing the $XSO by a substantial margin. That is the opposite of what one would expect in a bull market and should be treated as a warning to exercise caution.

ASX 200 Index

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Aussie Dollar weakens

The Aussie Dollar is headed for a test of primary support at $1.015 on the weekly chart. Failure of support would offer a target of $0.96, while respect would signal another attempt at $1.06. Reversal of 63-day Twiggs Momentum below zero suggests a downward breakout.

Aussie Dollar/USD

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ASX 200: The scramble for yield

The ASX 200 broke short-term resistance at 5050 on the hourly chart before retreating to test its new support level. The index is advancing in layers of 25 points (5000 >> 5025 >> 5050 >> 5075) and shows no signs of abating. But retracement to test the new support level of 5000 remains likely in the larger time frames. Respect of support on the weekly chart would confirm a primary advance, with a long-term target of 6000*.

ASX 200 Index

* Target calculation: 5000 + ( 5000 – 4000 ) = 6000

One area of concern: the advance is being driven by a scramble for yield, with blue chip stocks in the ASX 50 [$XFL] out-performing mid-caps [$XMD] by a wide margin — the exact opposite of what one would expect in a bull market.

ASX 200 Index

The situation is even worse when comparing to small-caps [$XSO].

ASX 200 Index

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