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A Troubling Update On Australia’s Housing Bubble

Takeaway: The housing bubble in Australia is bad news for the country's big banks.

Editor’s Note: Below is a brief excerpt from an institutional research note written by Hedgeye Financials analyst Josh Steiner discussing ME Bank’s semi-annual report called the Household Financial Comfort Report which details the results of a survey that gathers responses from a significant sample size of 1,500 households.

 

This is an update to a previous piece, “Banks on the Barbie: Four Short Ideas In Australia’s Housing Bubble.” To access our institutional research email sales@hedgeye.com.

 

A Troubling Update On Australia’s Housing Bubble - Australia housing cartoon

THE PORTION OF AUSTRALIANS UNABLE TO MANAGE THEIR DEBT JUST DOUBLED

The red line in the chart below represents the portion of the 65% of indedbted households that expect they will be unable to make their minimum payments. After being virtually flat for the entirety of the survey’s life, that line has risen twofold in the last six months from 5% as of December 2015 to 10% as of June 2016. To be clear, that means that 10% of the 65% of Australian households with debt—6.5% of all households—expect to default in the next 6-12 months.

 

A Troubling Update On Australia’s Housing Bubble - australia manage debt

 

**To access our institutional research email sales@hedgeye.com.

 

 


What Wall Street Missed About Friday’s Jobs Report

In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough and Senior Macro analyst Darius Dale discuss Friday’s Jobs Report. Spoiler alert: #EmploymentSlowing.


Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth

Takeaway: Fed policies boosted asset prices to the benefit of the super rich while devaluing the American people's purchasing power.

Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth - Fed Up cartoon 03.22.2016

 

In a late 2010 Washington Post op-ed entitled "Aiding the Economy: What the Fed Did and Why," then Fed chairman Ben Bernanke defended the FOMC's zero interest rate policy and quantitative easing saying:

 

"[Fed policies] had eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate this additional action. Easier financial conditions will promote economic growth... And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion." (Emphasis added)

 

Nearly six years have passed since Bernanke wrote those fateful words. The supposed "wealth effect," brought on by super easy Fed policy, has failed to "boost consumer wealth" for a significant number of Americans.

 

According to a recently released Federal Reserve Bank of New York study, 15.1% of households in the U.S. population have either zero or negative net wealth. The authors find that Americans plagued by negative wealth are more likely to be female; from single parent households; or from a minority group (either African American or Hispanic). These households are riddled with credit card debt, student debt and mortgage debt (with "some 7 percent of home-owning households in our survey report being underwater on their mortgage," the survey finds).

 

With the Fed's balance sheet comfortably above $4 trillion and so much promise from omnipotent central bankers, why are so many Americans still struggling? The S&P 500 is up 170%+ since the market bottomed in 2009. In short, what gives?

 

Here's the key chart showing the breakdown of total wealth in the U.S. and the ownership of U.S. financial assets by wealth distribtuion from our 99-page Q3 2016 Macro themes presentation. As you can see the top 10% of Americans own 84.5% of U.S. financial assets. In other words, debt-ridden families weren't able to participate in the Fed-stoked asset price boom. (To access our institutional research email sales@hedgeye.com.)

 

So much for the wealth effect...

 

Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth - wealth 8 8 16 

 

Meanwhile, during Bernanke's reign, the Fed devalued the U.S. Dollar to a 40-year low, in 2011-2012, thereby devaluing the purchasing power of the American people. Then again currency devaluation, asset price inflation in central planning 101. Note: This policy doesn't help the bottom 50% of Americans who own 1% of U.S. financial assets and are paid in U.S. dollars.

 

Unfortunately, the Fed's policies have helped lined the pockets of the rich and inflated "one of the top-three stock market bubbles in history" all at the expense of average Americans. 

 

Fed Perpetuated Problem? Fed Study Finds Many Americans Have Negative Wealth - Fed  Haven t a clue  cartoon 07.13.2016


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Daily Market Data Dump: Monday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, rates and bond spreads, key currency crosses, and commodities. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products

 

CLICK TO ENLARGE

 

Daily Market Data Dump: Monday - equity markets 8 8

 

Daily Market Data Dump: Monday - sector performance 8 8

 

Daily Market Data Dump: Monday - volume 8 8

 

Daily Market Data Dump: Monday - rates and spreads 8 8

 

Daily Market Data Dump: Monday - currencies 8 8

 

Daily Market Data Dump: Monday - commodities 8 8


The Key Takeaway From Friday's Jobs Report & What It Means For 10-Year Treasury

Takeaway: After Friday's rate of change slowdown in the Jobs Report, the risk range on the 10-year Treasury is 1.45-1.60%.

The headline jobs number was “good” while the rate of change in non-farm payrolls slowed again to 1.72% versus 2.30% in February 2015. That got U.S. Treasury 10-year to tap the top-end of my 1.45-1.60% risk range. The signal says that’s probably it with 1% GDP being goldilocks, for now.

 

 

Here's the Key NFP rate of change chart:

 

The Key Takeaway From Friday's Jobs Report & What It Means For 10-Year Treasury - nfp 8 5

 

Editor's Note: The snippet above is from a note Hedgeye CEO Keith McCullough wrote for subscribers this morning. Click here to learn more.


CHART OF THE DAY: A Closer Look At Earnings "Beats" Vs. Earnings "Growth"

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.

 

"... What is American Goldilocks?

 

  1. Forget the 2-3-4%, we need GDP of 1% (but definitely not 0%)
  2. Earnings to “beat” beaten down expectations (and still be negative y/y)
  3. A Dovish Fed that pretends to be hawkish so they can go back to dovish
  4. The “but, but… the labor market is good” political narrative
  5. Stocks and Bonds near their highs for the YTD, at the same time

 

Yep. Don’t worry. We’re all in the 1% now."

 

CHART OF THE DAY: A Closer Look At Earnings "Beats" Vs. Earnings "Growth" - 08.08.16 EL chart


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