Australian (ASX) Stock Market Forum

Inflation

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mullokintyre said:
Well, I was hoping for the simple part, as the data points I put up were quite simple, and showed that post announcement of QE, the yields gave a damn good impression of going up, which is the opposite of what you posted (without any supporting data I might add :):) ).
Mick
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um no that is literally what I said. Read it again and make sure you know the difference between bond price and bond yield.

InsvestoBoy said:
As usual, exactly the opposite of what everyone (even the RBA) says QE/bond buying does.

Bonds fell quite a lot since the start of QE (which is according to the RBA supposed to increase bond prices/decrease yields).

Immediately after the news that RBA was ending QE, bond prices shot up (yields fell).

(speaking as someone who holds 25% of their net worth in long duration Government bonds and tracks their pricing closely across the yield curve)
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cross-post:

Jobs report in, is awful, futures flipped from +0.6 to -0.6, more no **** sherlock analysis:

23456262624562456425624565.jpg

As I keep saying, we've had our inflation, now here's your stagnation.

Hence why we now get statements from the fed like this:

134513456134623456123456.jpg

If that doesn't tell you firstly that A: they're absolutely bricking it and B: they're going to err on the side of hot inflation than high unemployment, nothing will.
 
A good example of actual interest rates being different from stated interest rates are what they call “Zero Coupon bonds”.

A zero coupon bond has a stated interest rate of 0%, but they always sell at a discount to its face value, meaning the owner will make a capital gain when the bond is finally paid at maturity, rather than monthly interest.

For example a 10 year 0% interest $1000 bond might sell in to the market for $500, when the bond matures in 10 years the owner gets paid the full $1000 face value, even though they only paid $500 for the bond upfront, meaning their actual interest rate was a 7% compounded return.

The closer the bond gets to maturity the closer the market price moves towards its face value, so you don’t have to wait the full 10years to earn a profit.

—————————

In recent times reserve banks have been both lowering rates, and buying bonds to support their prices which lowers yield, their first step is to reduce the price support, then they will start to raise face value interest rates.
 
over9k said:
Oh and just in case anyone's still unclear on how to profit from inflation, just think about what actually drives inflation:
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On a directly related subject, household energy bills to rise 54% in the UK from April:


For those on lower incomes who already choose between heating or eating, it's all going to be rather miserable.

For everyone else well more money spent on energy means a corresponding reduction in spending on discretionary things and/or investments with the resulting flow on effects economically.

Here in Australia well I wouldn't expect to see a 54% jump in one hit but there's definitely cost pressure in the industry. The LNG netback price is presently $39.11 / GJ versus domestic market prices between $9.52 and $11.25 depending on state. Given the increasing linkage of the Australian market to international markets, that huge gap won't persist - either international prices are coming down or Australian market prices are going up rather a lot. :2twocents
 
well i hold( held ) both SKI and AST ( both take-over victims ) i have held ORG in the past but would really need a Leninist Purge before i would even think about crunching the numbers again , and AGL is on my AVOID list , leaving APA on the watch-list but IMO over-priced

now i hold BPT ( 'free-carried') and WPL , but don't expect a big gain ( apart from WPL getting those BHP assets )

now MAYBE GTK ( i have a low-ball top-up order in the market ) and HSN ( both ' free-carried' ) might get a boost ( provide services to utility companies , and others )

but currently NZ is my main exposure to utility companies ( i hold CEN , GNE , MCY , and MEZ )

now food RETAILERS ( since they exert immense pressure on manufacturers/producers/processors ) might be one sector ( but don't neglect pressure from the governments , if inflation really gets going )

BTW keep an eye on the Aussie Dollar a weak ( local ) dollar makes SOME producers more profitable when they export
 
Smurf1976 said:
On a directly related subject, household energy bills to rise 54% in the UK from April:


For those on lower incomes who already choose between heating or eating, it's all going to be rather miserable.

For everyone else well more money spent on energy means a corresponding reduction in spending on discretionary things and/or investments with the resulting flow on effects economically.

Here in Australia well I wouldn't expect to see a 54% jump in one hit but there's definitely cost pressure in the industry. The LNG netback price is presently $39.11 / GJ versus domestic market prices between $9.52 and $11.25 depending on state. Given the increasing linkage of the Australian market to international markets, that huge gap won't persist - either international prices are coming down or Australian market prices are going up rather a lot. :2twocents
Click to expand...
And this is the other reason why my crypto mine is in tasmania ;)
 
Australia is actually pretty good when it comes to self sufficiency in raw materials. But this is smurf's wheelhouse so I'll let him answer.
 
Last edited:
over9k said:
Australia is actually pretty good when it comes to self sufficiency in raw materials. But this is smurf's wheelhouse so I'll let him answer.
Click to expand...
The short answer is Australia's a major producer of natural gas but, since the ability exists to export gas that creates a partial linkage of Australian prices to international prices.

If gas is selling for $x internationally then that's going to be a very relevant factor for anyone negotiating a new contract with a producer. Both parties will be very consciously aware that, up to the limit of the capacity of the LNG facilities, they can sell an effectively unlimited amount on the international market at the prevailing price as there's no shortage of buyers.

For that reason the ACCC calculates what they refer to as the netback price. That's not the international market price as such but it seeks to answer the question of how much gas is worth to the LNG producers taking into account the cost of liquefaction in order to be able to ship it. In other words, what's the upper limit they could pay and break even?

Some recent data there:

December 2019 (pre-pandemic) = $6.53 per GJ

July 2020 (pandemic low) = $2.29

April 2021 = $6.44
May 2021 = $7.64
June 2021 = $9.69
July 2021 = $11.74
August 2021 = $14.38
September 2021 = $14.85
October 2021 = $22.18
November 2021 = 39.35
December 2021 = $36.30
January 2022 = $41.24
February 2022 = $39.11

In the short term Australian users are protected by contracts and so on so there's been no real impact thus far but contracts don't run forever. As they come up for renewal, the international pricing situation is going to be a factor in negotiations between gas producers and retailers who sell it to consumers.

How significant is gas?

For some businesses and individuals it's basically irrelevant but for various manufacturing businesses etc it's highly significant and it's also of significance for many households.

Of itself gas won't make or break inflation, I'm not suggesting it will, but but whether it's Australia or the UK (or anywhere else) it's another straw on the proverbial camel's back, it's another thing where there's upwards price pressure. In the UK's case that's now flowing through to consumers whereas in Australia the effects are thus far contained due to existing contracts etc but those don't last forever, the price pressure is there as they come due for renewal.

Price data I've quoted is from the ACCC website. :2twocents
 
Smurf1976 said:
The short answer is Australia's a major producer of natural gas but, since the ability exists to export gas that creates a partial linkage of Australian prices to international prices.

If gas is selling for $x internationally then that's going to be a very relevant factor for anyone negotiating a new contract with a producer. Both parties will be very consciously aware that, up to the limit of the capacity of the LNG facilities, they can sell an effectively unlimited amount on the international market at the prevailing price as there's no shortage of buyers.

For that reason the ACCC calculates what they refer to as the netback price. That's not the international market price as such but it seeks to answer the question of how much gas is worth to the LNG producers taking into account the cost of liquefaction in order to be able to ship it. In other words, what's the upper limit they could pay and break even?

Some recent data there:

December 2019 (pre-pandemic) = $6.53 per GJ

July 2020 (pandemic low) = $2.29

April 2021 = $6.44
May 2021 = $7.64
June 2021 = $9.69
July 2021 = $11.74
August 2021 = $14.38
September 2021 = $14.85
October 2021 = $22.18
November 2021 = 39.35
December 2021 = $36.30
January 2022 = $41.24
February 2022 = $39.11

In the short term Australian users are protected by contracts and so on so there's been no real impact thus far but contracts don't run forever. As they come up for renewal, the international pricing situation is going to be a factor in negotiations between gas producers and retailers who sell it to consumers.

How significant is gas?

For some businesses and individuals it's basically irrelevant but for various manufacturing businesses etc it's highly significant and it's also of significance for many households.

Of itself gas won't make or break inflation, I'm not suggesting it will, but but whether it's Australia or the UK (or anywhere else) it's another straw on the proverbial camel's back, it's another thing where there's upwards price pressure. In the UK's case that's now flowing through to consumers whereas in Australia the effects are thus far contained due to existing contracts etc but those don't last forever, the price pressure is there as they come due for renewal.

Price data I've quoted is from the ACCC website. :2twocents
Click to expand...
Also, australia now has a east coast natural gas grid, with all major pipelines being interconnected, so trading gas from any of the production zones into the LNG facilities is possible, there is no stranded gas that local buyers can screw down the price on.
 
Fresh from having the BOE announce its second consecutive rate increase since 2004, the ECB have started to join the about face.
From Reuters
FRANKFURT, Feb 3 (Reuters) - The European Central Bank finally acknowledged mounting inflation risks and even opened the door a crack to an interest rate increase this year, marking a remarkable policy turnaround for one of the world's most dovish central banks.

The ECB has long argued that high inflation will fall back below its 2% target on its own later this year but a string of record-high readings have challenged a narrative that other central banks abandoned months ago.


"Inflation is likely to remain elevated for longer than previously expected but to decline in the course of this year," ECB President Christine Lagarde told a news conference.

"Compared with our expectations in December, risks to the inflation outlook are tilted to the upside, particularly in the near term," she said, arguing that price growth across the 19 countries that use the euro is becoming more broad-based.


"The situation has indeed changed."

While Lagarde said the ECB would not rush into any move, she declined to repeat her previous guidance that an interest rate increase this year was "very unlikely".
Click to expand...
None of them ever admit that they got it wrong, just change their stance to accomodate the new reality.
Mick
 
sptrawler said:
Further to @mullokintyre post.
www.abc.net.au

Bank of England raises interest rates to 0.5pc, Meta faces historic market wipeout, ASX higher on late rally

Australian shares close in positive territory after a choppy session. Meanwhile, global equity markets tumble as frightened investors digest disappointing updates from major central banks about the outlook for inflation and interest rates.
www.abc.net.au www.abc.net.au

Bank of England raises interest rates to 0.5pc​

Click to expand...
It’s on.

Our twiddling board will be be next.

gg
 

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