Emerging Pressures

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–Oh now. There are “emerging inflationary pressures” in the economy says Treasurer Wayne Swan. But only for things you might really need, like vegetables (+16%), petrol (+9%), and electricity (+5%). For things that you can wear, watch, or lounge on, prices are actually falling (electrical goods down 7% in the March quarter, furniture down 6%, linens down 5%, and shoes down 4%).

–Let them eat shoes.

–The annual inflation rate for Australia is now running at about 3.3%. You can blame some of the key inflation culprits on unforeseen circumstances, like cyclone Yasi and the flooding in Queensland in March. But it’s harder to explain away the rising cost of fuel and power. Those hurt. And they are things people need, not things people merely want.

–What would really hurt, of course, is if the big Aussie banks put up interest rates in the face of rising inflation.  Rising interest rates mean rising home loan rates. And then we’d find out how close many Australians are to having no margin for error with their monthly expenses.

–Then again, people find a way to cut costs when they have to…as long as there isn’t a big spike in interest rates. And what could cause a big spike in interest rates? A U.S. dollar crash you say?

–Well, it’s hard to argue that the dollar is NOT crashing. June gold futures traded at $1,529.10 and silver futures rebounded almost five per cent to $48.35 in New York. This was after U.S. Federal Reserve Chairman Ben Bernanke fronted the media and told everyone…that nothing would be changing!

–Specifically, the Bernank said that the Fed would end its $600 billion bond-buying program on schedule in June. But he also said, “We are going to continue to reinvest maturing securities, both Treasuries and MBS, so the amount of securities that we hold will remain approximately constant…The amount of monetary policy easing should remain constant going forward from June.”

–Translation: QEII is ending. But easy money is here to stay. Virtually any asset that’s not U.S. cash loved this announcement. The Dow and the S&P—also not U.S. cash—both made their highest closes since 2008.

–The next real test for the dollar is when the U.S. reaches its statutory debt limit sometime in May. You can expect some kind of cock-a-mamey deal between the Congress and the President. It will cut spending, raise taxes, and raise the debt ceiling. That may avert a full on rout in the dollar.

–The U.S. dollar is probably overdue for a rally. The fact that it hasn’t rallied tells you global attitudes toward it as the world’s reserve currency may be fundamentally changing. Even so, is it possible the greenback could rally and take some of the starch out of rising commodity prices (especially oil)?

–Anything is possible. But the Bernank made it pretty clear he’s not going to raise rates. A dollar rally won’t come from rising U.S. rates. Where it will come from? U.S. economic growth? A lower budget deficit? A lower debt?

–Hmm. Well, we’re just speculating now…but a full-on outbreak of inflation in emerging markets might scare people out of those assets for a bit and back into the dollar. For example, truckers in Shanghai are striking in protest at the cost of fuel in China. That’s just one small example of how inflation in food and fuel can threaten normal economic activity for normal people.

–But let’s assume China is not going to blow up into an inflationary mess just yet. There is always a European government that seems to be on the edge of a fiscal abyss. Interest rates on two-year Greek government debt are now 22%. Last week, Greece’s government reported that its 2010 deficit would be 10.5% of GDP and not 9.4%

–What’s one per cent among friends? Well, to investors, this is confirmation that Europe’s debt problems need to be restructured. The alternative is another bailout by the rich nations in Europe. But even then, a plan like that would involve money printed by the ECB, leading to Euro weakness. Mind you Euro weakness is not automatically dollar strength. But it’s a thought…

–But if most paper currencies (the commodity currencies excluded) are getting weaker in terms of gold, what else could make the U.S. dollar rise? How about a geopolitical crisis? Or how about a genuine 20% correction in stock and commodity prices?

–It will be interesting to see how the markets view the Fed action after a few days.  If the Fed does keep the size of its balance sheet “constant” will it be enough to support stocks? Does it finally have enough strength to stand on its own earnings? Or is a version of the dollar carry trade back on, where speculators borrow in greenbacks to load up on commodities?

–One thing we do know for certain is that there are a lot of big borrowers in the world and not as many big lenders. This alone puts an indirect pressure on Australian interest rates. In the meantime, the Aussie dollar’s strength means the entry price for Aussie gold is pretty attractive, relatively speaking.

–Speaking of relative strengths and weaknesses, our trading colleauge Murray Dawes added a new update to his YouTube channel last week. You can view the Slipstream Trader YouTube Channel here. This will show you the key indexes and relationships Murray analyses to generate trades on the Aussie-listed stocks. You can also click on the image below.

Source: Slipstream Trader YouTube Channel

–And finally, on a lighter note, it’s hard to imagine Ben Bernanke’s halting, um-filled, public speaking style will inspire much confidence in his monetary policy. We have a suggestion. More Les Grossman, less Ben Bernanke (warning, possibly offensive language at the YouTube clip). The two look alike. And if Bernanke just shakes his money maker a bit, it might loosen people up and get them feeling good about the greenback. Whaddya reckon?

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Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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63 Comments on "Emerging Pressures"

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prozak
Guest
Well don Dan. I often looked at the slipstream trader advertising on your site and wondered why Daily Reckoning allowed that sort of “product” on their site. I wondered whether it was appropriate and whether DR was a sell out. Well, you’ve put that question to bed. You are now advertising in your articles. Hey, what the hell. As long as you make some money from it right? Who cares about things like morals, except hold on!. I seem to recall you recently said Wall Street is there just to make themselves rich…. Thankfully DR are morally superior and only… Read more »
prozak
Guest

Oops.. silly me…. you are peddling your own wares…

“Slipstream Trader is published by Port Phillip Publishing Pty Ltd”

prozak
Guest
What kind of financial services is PPP authorised to provide and what kind of products do these services relate to? Port Phillip Publishing Pty Ltd is licensed by the Australian Securities and Investments Commission (ASIC) to carry on a financial services business to: • provide general financial product advice for the following classes of financial products; • securities • derivatives to retail and wholesale clients (our subscribers). We advise on securities through our newsletters, e-letters, websites and reports. We do not offer any services for you to buy or sell the securities or derivatives we recommend. A list of stockbrokers… Read more »
prozak
Guest

Wow. Have I been naive all this time.

Your advertising is worded as though it is independent to DR….

—-
“In 2010, one super-bright stock analyst helped Australian investors avert an 11% loss on David Jones… a 20% loss on Toll Holdings… and a 22% loss on Westpac stock.”

—-

Now I understand the true motivations of DR. And here i was just thinking you were all just harmless lightweight publishers.

I had no idea you were sellers of snake-oil.

prozak
Guest
more funny snake oil… — “And now you could benefit from my contacts – every trade I’ll send you will have their comments factored in. So each trade you make, you will be trading just like a currency trader in the City!! NO effort, NO skill, NO hassle… I’m going to cherry-pick what I believe are my very best money-making opportunities and rush them to you..” Please people. Do not pay a cent for the crap these people are trying to sell. Trading and making money from it is WAY more than a few buy and sell orders. The reason… Read more »
Ross
Guest
prozac, you have been on about this for years. The audience has heard and is aware. We read free copy, we understand that DR is supported and funded by providing publicity to other publications, buyer beware. Do you watch PBS? Doesn’t DR always declare they are sister publications when promoting them? Matter extinguished. You wouldn’t have been brought up a socialist would you? Let’s go to the other side. Remember crony capitalism? Remember Telstra and American friends that never created any value in their lives but through their political mates and compliant boards always took the silverware and left a… Read more »
Joe
Guest

Nicely worded Dan. I thought Prozac (surely needs to be on Prozac) was a tad off-side.

Biker
Guest

“Oh Now?” Oh No. Ono. O John!
The FUDsters cheer inflation on…
And interest fears again we’ll thrash
Still hoping for our Housing Crash!~ ;)

Pete
Guest

@Prozac: Duh? Of course they advertise THEIR OWN products. It’s obvious, and there’s nothing wrong with it.

You’ve posted the worst series of comments ever, even worse than Biker Pete.

You can do better than that. Get some sleep or something.

Biker
Guest

“You’ve posted the worst series of comments ever, even worse than Biker Pete.”

What, even funnier than your delightful rant about never voting Labor again, Pete? Funnier than your 70% property crash prediction?!

Alzheimers an issue, Pete?

Pete
Guest

You’re delusional Biker. You probably still think that I am Prozac. Hell, everyone on here who disagrees with you is Prozak.

Back to la-la land for you. Isn’t it time someone changed your diaper?

Ned S
Guest

And everyone who ever fails to disgaree with Biker in every way must be his closet gay bum boy ‘mate’ hey Pete??? Aka “I’m pretty sure he must just have a closet gay relationship with Ned” :

http://nfbpsh.blogspot.com/2011/01/today-tonight-perth-property-story-30th.html

Go right royally roger ya self Pedro!

Ned S
Guest

Ya low life scum sucking dirtbag.

Biker
Guest

Hey, great serve, Ned.

Yes, I recall well the daze when Pete reckoned _we_ were the same fella;
then realising our views diverged on some issues, started his gay cr*p.

Listing his past delusions I momentarily forgot his key indicator that the property crash was imminent (many years ago); his belief that because realtors were driving last years’ models, Keen’s wonderful prophecies were about to be fulfilled… .

Interesting he’s rejoined the fold. If he persists with this kind of drivel, it will be fun (re)citing his more immature conclusions… . :D

Pete
Guest

Been doing some research Ned? Good for you!

It was written a while back, when you and Biker were having another one of your lovey-dovey gang up sessions against another commenter. Still, you’d have to say you two look a bit suspect from an outsiders perspective, no?

Ned S
Guest

Been doing some research Ned? Good for you! – Nope; BAD for YOU!!! (As I now KNOW you are shit!)

“you and Biker were having another one of your lovey-dovey gang up sessions against another commenter” – Given I have NO recollection of it(?), I can ONLY assume YOU didn’t have the balls to buy in?

Which fits MOST admirably with my statement above.

Ned S
Guest

Been doing some research Ned? Good for you! – Nope; BAD for YOU!!! (As I now KNOW you are “poo”!) – DRA censors the more usually used form of the word “poo”!

“you and Biker were having another one of your lovey-dovey gang up sessions against another commenter” – Given I have NO recollection of it(?), I can ONLY assume YOU didn’t have the balls to buy in?

Which fits MOST admirably with my statement above. Re you being “poo”! :D

Pete
Guest

You’re funny Ned. You and Biker have been playing tag-team on so many people, for so long.

You’re a bit too old to have a cry aren’t you?

Ned S
Guest

I’m content to let your own words speak for you Pete :

“I’m pretty sure he (Biker) must just have a closet gay relationship with Ned” :

http://nfbpsh.blogspot.com/2011/01/today-tonight-perth-property-story-30th.html

Ned S
Guest

Biker, I know you’ve gotten into the swing of keeping people’s comments to be used to remind them of them – That’s wise. But not being wise I’ve not done so. Anyway, given that Pete got caught out telling a big fib a couple of years ago (on which I kept no info despite questioning him over same at the time – As did others), do you happen do have info on same?

Ned S
Guest

It’s gunna be a huge pain in the arse to go back maybe two and and a half or three years in DRA history to prove Pete’s a dirtbag scum sucking liar – Even though it was pretty obvious at the time. So all help gratefuilly recieved … ???

Ned S
Guest

I before E except after C (most usually anyway) … :)

Ned S
Guest

Pedro, Pedro where for arst thou? … As a closet gay I desire to rubbest my male member against thy innermost thigh most vigoursly and most often! :D :D :D

Ned S
Guest

Pedro, Pedro – Bend you over; In the clover … You are a god damn scream Pete! :) Please reply – I haven’t had this much late nite fun since Fool last “declared victory!” :)

Pete
Guest
Oh Biker, please find me this ‘proof’ you have. Biker just makes up ‘proof’ in his own head, or attributes it to other people. Aren’t I Prozak Ned? You and Biker thought probably more than ten differently people were all just one person with a vendetta against you. Sad old men that you are. Incidentally, my post on that other blog was about you, not to you. It was simply a recognition that Biker and yourself are egotistical jokes of people with nothing to offer a website like this. If we could collate all posts by yourself and Biker, a… Read more »
Ned S
Guest

“Aren’t I Prozak Ned” – Never on any one occasion did I suspect you were Prozak Pete. He’s sick. You are just unsavoury! :D

Ned S
Guest

“I noticed you got real offended by the gay comment. Way to be insecure old Ned” – There is no way in hell that comment is gunna cut it from someone who made the comment going forward … Roll over and die Pete!

Pete
Guest

Oh, I wasn’t trying to take my comment back Ned. You just seem very offended… you know, maybe too offended. Do you have something you want to tell us all?

Biker
Guest
Yes, the gay slur continues. It’s to be expected, Ned. This is a very sad individual who bought Keen’s story long ago, to his own ongoing cost. While I have some sympathy for the involuntary homeless, Pete is one of those smart alecks who believes if he simply does _nothing_ but wait, a highly desirable million-buck home will fall into his lap for $300K. It’s as infantile as believing that the fella with the red suit in his chimney has a McMansion in that sack. In essence, there’s little difference in his wishing to that of the cargo-cultists of the… Read more »
Biker
Guest
Toured The Pinnacles@Duxton last night, Ned: Seven fifty-storey towers, containing 1838 impressive units, overlooking Singapore in every direction. As each (oversubscribed) stage was completed, selling prices escalated quite dramatically, until balloting of the final stage excluded thousands. The connectedness of the complex, at 25th and 50th levels, via walkways resembling terraces with treed gardens, has to be experienced to be believed. The top deck(s) include(s) extensive (passive) recreational areas. There were quite a few residents and visitors relaxing at ‘beaches’ or in parks even at 10:00 pm last night, many viewing the fireworks show at Sentosa Island. While we may… Read more »
Ned S
Guest

Biker: “25th and 50th levels, via walkways resembling terraces with treed gardens, has to be experienced to be believed” – I’ll believe it without experiencing it thanks Biker – I go all wobbly in the knees at those sorts of heights! :)

Pete: “my post on that other blog was about you, not to you” – With that being a very particular problem Pete. Those with any balls can bring themselves to stab their enemies from the front. But you prefer to do it from a different direction.

Ned S
Guest
As to the homo/hetero thing you seem so keen to hypothisise about Pete (and my ‘need” to confess re same :) ): * I had a good mate who was a ‘poof’ many years ago. When one of my mate’s younger bros felt to rush up to me one night down the boozer when me ‘poof’ mate and I’d been having a good old chat at a table all on our lonesome and announce : “Ned, He’s a Poof!” my response was “Yep; I know – Ferk Orff!!!” * And as to when I introduced my ‘poof’ mate to a… Read more »
Biker
Guest

Ned: “I go all wobbly in the knees at those sorts of heights!”

I did myself, Ned. While I normally have little fear of heights, I imagined(?) there was a slight tremor through the building(s). No-one else experienced it. Lightning from the south was pretty spectacular, but I didn’t capture it in any of my time exposures… .

prozak
Guest

Dan,

that add was from your .co.uk version of DR. Was it a subsidiary or separate company?

It is no different to yours anyhow. All of them promise some sort of easy money. It is WALL STREET who are there to make themselves rich right? Not DR. You cannot trust Wall St is your message. Trust us and buy snake-oil instead.

Ross – i’ve never mentioned DR advertising before. You are totally incorrect.

Pete – OK. That’s your opinion. Everyone is entitled to have one.

prozak
Guest
Dan, (or is it “mate”?) These are definitely your companies claims right? So definitely no mistake this time from me. “You’ll find slipstream trading amazingly simple: we recommend what action to take, tell you when to take it and how. You don’t need to be a genius-level technical analyst to make money with Slipstream Trader. Editor and Chief Technical Analyst Murray Dawes lays out all the information you need in plain English.” “Here’s your chance to test-drive the PROVEN Australian trading service that made a cumulative 57% return in 2010 – for the next 90-days – completely RISK FREE…” “In… Read more »
Ned S
Guest

Dan recommended retiring because the world was screwed didn’t he?

Talking about same, is BB’s stock market flag still at quarter mast battered and bullet torn and shell ripped … After the DJIA has come up about 85% – Not criticising … Just asking like?

prozak
Guest

I don’t recall all their opinion Ned.

What I am sure of is if someone had a sure fire easy way to make the sort of returns snake-oil sellers claim they make, they wouldn’t be in the publishing business.

Ned S
Guest

That’s probably a pretty fair comment Prozak! :)

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
Ahh Biker I see you still comment on topics you have little knowledge on? The Pinnacles project was a public housing project & the “Ballot” was limited to a strict selection criteria. Yes they offered great value because the prices were capped by the Govt. So there was a big demand for them. This would be like Homeswest offering flats in Subiaco at 35-40% discount of going rates. One of the criteria was (But not limited to) “The monthly household income ceiling for the purchase of 3-room flats is $3,000 while the monthly income ceiling for Studio Apartments (SAs) and… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Oh Dear our resident “Silver Back” shamed away!

Come back Biker Pete all you have to do is say you got it wrong?

Rather sulk in the corner?

Biker
Guest
Sorry to keep you waiting, staring at your monitor in anticipation, N Fool. We were flying home, in fact. I’ve only just seen your Google findings… First, I’m trying to find the exact line in my report above in which I’m supposed to have stated this was a private housing estate. Nope, it’s not there. Where did I state that Pinnacles@Duxton was a private housing estate? These units were _sold_ to interested applicants. Each new stage escalated in price. Yes, as you’ve stated, interest and demand exceeded supply, much in the same way as demand will soon exceed supply in… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Bonehead Rents have been going backward in real terms for 20 years?

Pinhead looking forward to the link where I said $9200?? Now that you are back in front of your Pentium @ it should not take long?

Rents up $30PW in the past 18 months? & you say $60 PA insurance rise is your only cost rise?

Fool stick to Biting Your Neck Clown!

Biker
Guest
What you claimed was $180 pw additional costs, Fool. That’s $9360 pa. You based that on your mistaken punt that interest rates would rise this year. Like all your predictions, it hasn’t happened. As for rents, according to RPdata, during the last five years, the cost of renting a house in Perth rose on average 8.7 per cent each year compared to the value of houses increasing on average 5.3 per cent each year. That’s a 43%+ hike… * We just raised the rent on one of our smaller 4X2X2 rentals by the exact figure you cite, $30 pw, in… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Bonehead pay attention i will type slowly so you can keep up.

You claimed I said landlords holding costs would go up $9200 Plus in 2011?

Now I said I never did say that & challenged you to put up a link showing where I said this? (I know you saye everything I say to play it back to me?)

When challenged you said wait till I get back to OZ as the link was on your Pentium2 back home?

So now that you are back put the link up Liar Pete!!

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
Bonehead Pete this is what you said Comment by Biker on 13 April 2011: Wrong?! Let’s see, N Fool: * Your call: Property crash 20% for 2010 (OK I said this but anyone listening to me will still be in front? Listening to you they would be behind!! I am right you were wrong) ha * Your call: Interest rates 8% in 2011 (Current rates are around 7.5-7.89% & forecast to have 2 increases by the end of the year ? we are still in 2011 7 months still to go) * Your call: Extra $9200pa after-tax in owners’ costs… Read more »
Biker
Guest

HaHa… . Have you apologised for misleading Perth tenants in regard to rising rents (8.7% rise per year, for the last five years)?

Have you apologised for wanking on and on and on about owning six properties you’ve since admitted lying about?

Have you apologised for spruiking a 20% crash in 2010? (Classic stuff… then sending us all a Keen vidclip with Steve claiming the market _rose_ 20%!

When I find the link, I’ll post it. Meanwhile, you just sit there staring
at your monitor waiting, son. It’s a good look… . :D

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Dip$hit stop trying to go off topic.

You were so confident you had a link???? BZZZ WRONG!!

Pinhead nothing to say about rates going to 8% in 2011? RBA came out this week softening the market up!!

Go Back to Biting your Neck CHUMP!

Biker
Guest
While you’re venting away on your Pentium, we’re picking olives, N Fool. Best crop we’ve had in years. Note you dropped Duxton like a hotcake! Talk about conveniently changing the subject. ;) Finding lots of quotable quotes from your past rants, while locating the $180pw prediction. There are literally tens-of-thousands of your posts across the global blogosphere, Canada included. Should have screenshot your ‘extra $180 pw’ comment… ! Here’s a classic (7th April 2010), in which you warn prospective homebuyers what’s to come: http://www.watoday.com.au/wa-news/what-housing-shortage-20100406-rowf.html East to see how you arrived at your $180 pw figure!~ :D And here’s the reference… Read more »
Biker Pete
Guest

Here’s the link, you lying little conman:

http://www.perthnow.com.au/business/generation-y-make-push-to-save-for-a-home/comments-e6frg2ru-1226009540668

“…in 2011 they can ALL look forward to extra payments around $9000 PA.”

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