Month: December 2011

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 22 Dec., 07:45 EST

THE PRICE OF spot gold bullion was little changed Thursday morning in London, easing back from $1610 per ounce after yesterday’s sharp spike and pullback in what dealers again called “thin” trade ahead of Christmas.

European stock markets reversed Wednesday’s drop to trade near two-week highs.

Base metals and energy prices were little changed. Silver bullion traded just shy of $29.50 per ounce in London’s professional wholesale market – a level first breached 13 months ago on the way up.

“Thin volume [in spot gold] on the way up proved to be a weakness,” says one London dealer, “and as soon as Euro sentiment turned bearish the precious metals followed suit.”

“A drying up of liquidity poses a serious risk to all commodities, including gold,” says today’s commodities note from Standard Bank, noting the “elevated level” of interbank interest rates in Europe.

“There has been a lot of disappointment with gold in the fourth quarter, especially from those who were banking on the metal’s safe haven properties, given the escalating situation in Europe,” says UBS strategist Edel Tully, quoted by the Financial Times.

Wednesday’s 3-year loan of €489 billion from the European Central Bank to 523 commercial lenders was much larger than banking analysts forecast, suggesting greater funding problems in the money market.

“It appears that a very large majority of the large financial institutions participated,” says Morgan Stanley’s head of European interest-rate strategy, Laurence Mutkin.

“They’ve taken a lot of their [2012] issuance needs out of the market.”

RBS economist Nick Matthews reckons that European banks face some €230 billion of maturing debt between Jan. and March next year.

The Spanish government sold €5.6bn of new debt on Tuesday at a surprise interest-rate of 1.7%, down from 5.1% in November because – some analysts now think – small and mid-sized banks wanted the bonds to offer as collateral to the ECB in yesterday’s loan operation.

“Despite all the uncertainty in Europe we are not witnessing a credit event just yet,” notes analyst Andrey Kryuchenkov at VTB Capital in London.

“Policy makers are constantly seeking to boost market sentiment and the Euro’s credibility.”

“If we don’t see any change on the policy front, the tight liquidity will extend into the new year,” reckons Hou Xinqiang, an analyst at Jinrui Futures in China – adding to Reuters, however, that anticipation of more central-bank action will likely boost commodity and gold prices later in 2012.

China’s National Social Security fund last week spent CNY 10 billion ($1.6bn) buying domestic-listed shares, according to Shanghai Securities News.

In the Swiss parliament Wednesday, politicians from all sides demanded that the central bank in Zurich do more to weaken the Franc against the Euro, thought to be hindering Swiss exports after attracting “safe haven” flows throughout the Eurozone debt crisis.

The Swiss National Bank this month repeated its target exchange rate of €1.20. Politicians called for that the Franc’s value to be lowered to €1.40, with close “monitoring” of foreign inflows should the Euro crisis flare again.

Parliamentarians voted against a proposal, however, to allow the Swiss National Bank to take its key target interest rate below zero.

The gold price in Swiss Francs has risen 13% from the start of 2011, only just shy of the US Dollar gain, hitting a series of new all-time highs in July and August.

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By JW Jones: www.OptionsTradingSignals.com

The wild and manic year of 2011 is finally starting to wind down as 2012 rapidly approaches. Market participants are waiting to see if Santa shows up with a present or a lump of coal for Wall Street this year. Performance anxiety is becoming apparent as professional money managers are running out of time to meet their stated benchmark performance.

Hyper-beta stocks such as AAPL and GOOG are likely to be well bid as money managers will chase Beta into year end if prices grind higher. This time of year volume generally dries up and volatility comes out of the marketplace giving the bulls a slight edge in terms of short term price action. While I expect some choppy price action the next two weeks, I believe strongly that we are at a major inflection point.

There are potential warning signs showing up in guidance reductions that seemingly continue to come out. Semiconductors as well as industries which are exposed to emerging markets seem to be indicating that economic conditions may be worsening as a result of the fiscal issues stemming from Europe and a possible slow down in emerging market economies like China.

Just as the end of the year usually leads to light volume drifts higher, it also produces predictions from economists, traders, and famous market prognosticators. No worries, I am not about to produce a list of my predictions as I think it is a futile endeavor. However, I want to point out a divergence in price action in 2011 that continues to defy what most market professionals would have expected in 2011.

The divergence is not some fancy proprietary indicator, but the performance differentials of the S&P 500 Index and 30 Year Treasury bonds. The table below, courtesy of Morningstar illustrates the performance of Treasury bonds year to date as of Friday’s close:

As can be seen above, the Long-Term U.S. Government Bond has returned 23.16% in 2011. Back in January of 2011 had I been informed that as of the close on December 16, 2011 30 Year Treasury Bonds would have returned more than 20% to investors I would have been shocked. Furthermore, I would have expected U.S. equities to have been pounded lower. Treasuries truly have rallied, but the S&P 500 was only trading 3% lower for the year as of the close on December 16^th. So what does this divergence mean?

Obviously astute readers would point out that the Federal Reserve’s monetary policies have had a major impact on Treasury prices and I do not disagree. However, the divergence is remarkable in that either equities are extremely overvalued or Treasuries are overvalued going into 2012. From a long-term technical standpoint, the price action in both underlying assets reveals that we are truly at a major inflection point and the near term price direction will give us clues. The daily chart of the S&P 500 and the weekly chart of the 30-Year Treasury Bond are shown below:

S&P 500 Daily Chart

As can be seen above, a smaller wedge broke down back in November which resulted in a loss of roughly 80 S&P handles in a matter of a few weeks. The price pattern on the daily chart is now in an even larger wedge formation. This type of formation stores significant amounts of “market energy” which will result in a significant move in the price action when a breakdown or a breakout occurs.

30-Year Treasury Bond Weekly Chart

The 30-Year Treasury Bond is on the verge of breaking out to new all time highs as early as this week. The flip side of the bullish argument is that price will fail carving out a double top and sending Treasury prices considerably lower. The S&P 500 is trading in a triangle on the daily chart and the 30 Year Treasury Bond is on the verge of breaking out to the upside. Typically cycles break with the news and I expect a major announcement to take place in coming days / weeks that will enlighten us as to whether the S&P 500 or long term government bonds are expensive.

Clearly Europe will have a major impact on which direction price action ultimately breaks for both Treasury Bonds and the S&P 500. Fourth quarter earnings and final gross domestic product numbers will also be quite telling as to the strength of the marketplace. However, the U.S. Dollar and the Federal Reserve’s forward monetary policy in 2012 will likely seal the fate for both government bonds and equities.

My contention is that the Federal Reserve may find themselves in quite a predicament which may not have a positive long term outcome for the United States regardless of their decision. If Europe starts to fall apart, I will be shocked if the Federal Reserve does not come out with QE III.

The implication of QE III could be quite severe and could cause the Dollar to fall off of a cliff. The Federal Reserve would rather have inflation than deflation, that is without debate. If Europe starts to falter, deflation will become the buzz word and the Federal Reserve will likely act.

If Europe starts to break down and the Federal Reserve does nothing I expect to see a major selloff in risk assets as money will pour into the short term safety and liquidity of U.S. Dollars and Treasuries.

If the Fed initiates QE III, risk assets will rally sharply as gold, silver, oil, and the S&P 500 will benefit. Commodities will enter their final bubble while the S&P 500 eventually would break down violently as interest rates and higher commodity prices hammer the economic cycle.

The daily chart of the U.S. Dollar Index and the Reuters/Jefferies CRB Commodity Index are shown below:

U.S. Dollar Daily Chart
 

The U.S. Dollar is trading in a consolidation zone near the recent highs. In addition, the U.S. Dollar Index has traced out a rising wedge pattern which could ultimately break in either direction and reinforces that a major inflection point is upon us.

A pullback that tests the lower support level seems likely based on seasonality. These charts are all indicative that something is brewing in the early part of 2012 which may result in major moves in a variety of underlying asset classes.

Reuters/Jefferies Commodity Index Daily Chart

The CRB Index is trading right at key support. Price action could form a double bottom and bounce higher to test the descending resistance line shown above. I would point out the oversold nature of the CRB Index presently. A bounce appears likely, the question is whether price will be able to push through resistance.

A bounce may work off oversold conditions and allow for a major retest of the October 2011 lows. It is not an accident that major underlying asset classes are all coiled up in what is going to be a major move in the early part of 2012. The stage is set, the only question is which outcome and price direction occurs.

I would point out that the Dollar is trading in a tight consolidation zone presently and could break in either direction while the Commodity Index could either be putting in a double bottom (bullish) or possibly could breakdown to new lows. The stage is set for 2012, the question is which direction Mr. Market will choose?

I do not have an opinion at this point in time as to how this situation will finally be resolved. I plan on monitoring the price action while waiting patiently for breakouts in either direction to be confirmed. Europe and the U.S. Dollar are going to be critical in 2012, that is obvious.

We are presently at a major inflection point and frankly whether Santa Claus comes to Wall Street in 2011 is not nearly as important as what happens in the 1^st Quarter of 2012 as all of these charts will likely see some form of resolution. Be careful out there.

Get these weekly reports and trade ideas free here: www.Optionnacci.com

JW Jones

By Chris Vermeulen: www.TheGoldAndOilGuy.com

By The Sizemore Letter

Perhaps it is my surroundings, but I have emerging markets on my mind this morning.  I’m writing this article from, of all places, Paijan, Peru, where I’ll be spending the Christmas and New Year holidays with my inlaws (see map of Paijan).

Paijan is a small farming and ranching town on Peru’s Pacific coast that epitomizes the best and worst of an emerging market country like Peru.  You see unlimited opportunities here, non-stop new construction, and a steady stream of migrants from the surrounding hinterlands who are motivated to climb their way up the social ladder.  Every man, woman and child is an aspiring entrepreneur, whether they be operating a restaurant out of their home, using a modified dirt bike as a taxi, or selling ice cream to passersby in the Plaza de Armas.  Mobile phones—and even BlackBerries and the occasional iPhone—are ubiquitous.  And yes, Paijan  even has high-speed internet access, provided by a local subsidiary of Spain’s Telefonica (NYSE: $TEF). There is an energetic buzz in the air and a sense that progress is possible.

But lest I paint an unrealistic picture, Paijan is still a third-world farm town.  It suffers from poor-quality education, periodic power outages, and the sorts of social divisions that tend to pop up with rapid growth.  Violent crime is on the rise, and you don’t want to be on the highways after dark for fear of being ambushed by armed bandits (I’m not joking, by the way).

And good luck getting to Paijan.  Road infrastructure is mediocre at best; the Panamerican Highway is roughly on par with a pre-Interstate 1940s U.S. highway.  Flights to the nearest airport in Trujillo are often delayed or even arbitrarily cancelled.  And getting simple questions answered can be an exercise in frustration.

Still, the contrast between Paijan—and by proxy Peru and the whole of the emerging market world—and the debt-laden economies of Europe and North America is telling.  It’s the difference between people with real hopes of growth and improvement versus people struggling to maintain what they have.  It’s optimism vs. pessimism.

We still have a few trading days left in 2011, but it is safe to say that this wasn’t a good year for emerging market investors.  In a year in which the S&P 500 was flat, most emerging markets suffered what I’d consider a bloodletting.  Even after bouncing sharply off of their October lows, nearly every emerging market ETF is solidly in the red for 2011. To give examples of a few that I follow:

• iShares MSCI Emerging Markets (NYSE:$EEM): Down 15% YTD
• iShares MSCI Turkey (NYSE:$TUR): Down 30% YTD
• iShares MSCI Brazil (NYSE:$EWZ):  Down 23% YTD
• iShares MSCI Peru (NYSE$:EPU): Down 17% YTD
• iShares FTSE China 25 (NYSE: $FXI): Down 15% YTD

Even my beloved Emerging Market Consumer ETF (NYSE: $ECON), which should be fairly insulated from the macro issues emanating from Europe, is down 7 percent year to date.   In a word, ouch.

In a globalized economy, no crisis is ever purely local.  Turbulence coming from Europe rocked the Old Word’s trading partners in Asia and Latin America, and when investors went into “risk off” mode, emerging market equities were among the first to be sold.

In 2012, I see a major reorientation of the world economy.  The reorientation has actually been underway for years, but it should noticeably accelerate in 2012 and the years that follow due to Europe’s crisis.

The “emerging market” growth model of the last 60 years has been pretty cut and dry—produce as cheaply as possible and export to the United States and Europe.  This strategy was great, so long as the Americans and Europeans were buying.  But with American households still in the process of deleveraging and with Europe in the early stages of what will most likely become a Japanese-style slow-motion depression, it looks less and less viable as a model for growth.

2012 will be the year of the Emerging Market Consumer.  With demand from the developed world tepid at best, trade between emerging markets themselves will accelerate, with an emphasis on the new middle and leisured classes.

By and large, emerging market consumers, companies and governments are starting with low levels of debt; there is no “debt overhang” and no need for the pain of austerity and deleveraging the developed world is suffering.  In other words, most emerging-market economies still have a ways to run.

Investors wanting to profit from these developments can go about it one of two ways.  You can buy shares of emerging-market companies that sell primarily to the domestic market using an ETF like ECON (or any of its holdings), or you can buy shares of Western firms like Telefonica that get a large percentage of their revenues from emerging markets.

If you liked this article by Sizemore Insights, you’d probably enjoy The Sizemore Investment Letter, our premium members-only newsletter. Click here for more information.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

The 1.5 day EUR rally ended after the first round of the new long term refinancing operation (LTRO) showed 523 banks took more than EUR 489 bn worth loans from the ECB. The amount taken was at the high end of analyst expectations and shows the liquidity shortage European banks face. One question that needs to be asked, is this a back door solution to ECB QE?

Economic News

GBP – MPC Meeting Minutes Show Willingness for more QE

Yesterday’s release of the BoE monetary policy committee meeting minutes show the committee may be open to additional QE. Inflation remains above the 2% target but is likely due to temporary factors such as the VAT increase and elevated crude oil prices. The BoE forecasts inflation to fall back and the risk for deflation may become more evident. Thus there is the potential for additional asset purchases (QE) in the future. Market expectations are for further action to be carried out in February but traders should remember the BoE surprised the markets in October with more bond buying.

Sterling was bid up until the LTRO numbers were released with the GBP/USD touching the November 30th high of 1.5775 before reversing. Support is back at the November/December low of 1.5410-20.

EUR – The ECB LTRO: A Back Door to QE?

The 1.5 day EUR rally ended after the first round of the new long term refinancing operation (LTRO) showed 523 banks took more than EUR 489 bn worth loans from the ECB. The amount taken was at the high end of analyst expectations and shows the liquidity shortage European banks face. One question that needs to be asked, is this a back door solution to ECB QE?

The numbers from the LTRO are impressive. 523 banks participated in the borrowing. The previously mentioned numbers to don’t include lending in a 1-week and 2-week auction which total an additional EUR 38 bn. The ECB has succeeded in backstopping the liquidity needs of European banks though the funding needs of the sovereigns remain unsecured. There has been significant chatter of European banks reinvesting the proceeds from today’s LTRO back into EU bonds though this remains to be seen as banks continue to de-leverage prior to Basel III rules taking effect.

The question that investors should be asking is if the LTRO is a back door to QE? While the ECB is prohibited from funding a nation’s deficits, the ECB continues to supply banks with extra liquidity which may lead to further declines in the EUR.

Following the initial spike up to 1.3200 the EUR/USD came off sharply and now has support at the yearly low of 1.2870. Resistance is found at 1.3200 from the trend line off of the October high

JPY – BoJ Hold Rates Steady

The BoJ left its unsecured overnight call loan rate steady at 0.0%-0.1%. The decision was unanimous as was the decision to keep the amount of the bank’s asset purchase fund unchanged at JPY 55 trn. In the BoJ monetary policy statement the central bank highlighted a slowdown in the Japanese economy, “Due to the effects of a slowdown in overseas economies and of the appreciation of the JPY.” The BoJ also noted lower business sentiment despite increased domestic demand. Yesterday’s trade deficit numbers for the month of November showed an increase to JPY 684 bn which is a new record the month. The data hints at a potential current account deficit for Q4 which is typically a negative for a currency.

Dow Jones reported that the Japanese government is ready to lower this year’s GDP forecast down to -0.1% from the previous 0.5%. For 2012 GDP could be revised lower to 2.2% from 2.7%.

Gold – Gold and EUR/USD Correlation Strengthening

Traders should note the high correlation between the EUR/USD the CRB spot commodities index. According to Reuters, the two assets have a 90-day rolling correlation of 0.55, and this trend looks to push higher. Thus, as the EUR/USD goes, so does the price of spot gold, or rather traders should think of the gold/EUR relationship in terms of the USD. Traditionally, gold has not performed well in periods of robust USD strength. As the European debt crisis continues to drag on, those who believe the debt crisis will take a turn for the worst may become less positive for the outlook on gold.

Technical News

EUR/USD

On a weekly basis the EUR/USD broke some important technical barriers, closing below the rising trend line from the January and October lows. The weekly close 1.3045 was also in-line with the 61% Fibonacci retracement from the 2010-2011 bullish trend. While weekly stochastics are currently oversold the monthly stochastics may have room to run lower. The January low of 1.2870 is the near-term support with additional support coming in at 1.2665 from the monthly chart off of the 2008 and 2010 lows. Resistance is back at 1.3140 and the 20-day moving average of 1.3275, followed by the December high of 1.3550.

GBP/USD

Sterling has consistently been sold at previous resistance levels and with falling weekly and monthly stochastics this strategy could remain intact. Initial support is found at Friday’s high of 1.5560 and the pair may have scope back to the range between the 55-day moving average at 1.5740 and the late November high of 1.5775. Any rally could be capped at 1.5890 from the falling trend line off of the August and October highs. The test for sterling shorts will come at the October low of 1.5270. A break here may find support at the trend line stemming from the January 2009 low which is found at 1.5100.

USD/JPY

The USD/JPY is encroaching on its trend line from the 2007 high which comes in at 78.30. Weekly and monthly stocahstics are both moving higher and a break above the trend would expose the post-intervention high of 79.50 and the August high of 80.20. A failure to make a significant close above the trend line could have the USD/JPY testing the December low of 77.50 and the November low of 76.55.

USD/CHF

Last week’s break above the 0.9330 resistance opens the door to this year’s high of 0.9782 as well as the December high of 1.0065. The falling trend line from the 2003 trend line comes in at 1.1165 and makes for a long term resistance level. To the downside 0.9330 will now act as a support followed by the late November low of 0.9065 and the 200-day moving average at 0.8925.

The Wild Card

EUR/JPY

The EUR/JPY is a textbook example of how broken support levels turn into resistance. The November low of 102.50 was breached by a swift move lower though the EUR/JPY slowly retraced back to this level. Yesterday the pair ran into selling pressure at the same price. Forex traders should now look to the supports at 100.75 and the 2010 low of 99.90.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By MoneyMorning.com.au

Yesterday, the National Housing Supply Council released the latest State of Supply report. It will come as no surprise to learn, “Despite weaker market conditions, the housing shortage continues to widen.”

Yeesh! Not that old chestnut.

We won’t waste too much of your time on the latest report. Because it’s just not worth the ink. We’ll simply make these points…

One of the silliest parts of the previous State of Supply reports was the inclusion of homeless people and caravan dwellers as proof of a housing shortage. As we saw it, it was one of the most insensitive and insulting things we’ve ever seen.

Any shrink worth their salt will tell you homelessness isn’t caused by high house prices. It’s caused by mental problems, family breakdowns and financial stress (which may or may not be housing related).

You may remember this table included in the 2008 State of Supply report:

Note that 2,000 of the supposed housing shortage is simply down to… rounding the number up “to the nearest 5,000″! And 26,000 was due to increasing the rental vacancy rate.

In other words, almost one-third of the number doesn’t even represent a housing shortage. It’s just number-play. It’s like saying a supermarket has an undersupply of milk because it normally has 10 bottles left at the end of each day, but now it only has eight left at the end of each day.

This table doesn’t appear in the latest report. We wonder why? Surely, the NHSC isn’t trying to hide the source of its housing shortage numbers…

Another point is the estimated housing shortage for 2009 has actually fallen by nearly 20,000 to 158,500. Why? Because the NHSC now includes previously uncounted “conversions”.

A warehouse converting to a block of flats is an example.

But that still doesn’t stop the NHSC saying the housing shortage has worsened. Because thanks to all the unbuilt homes (because there’s no demand for them is our bet) the current housing shortage stands at 186,800.

And by 2030, the housing shortage will go up to… 640,200.

Anyway, it just makes us wonder how reliable the rest of the numbers are… and how much we can rely on the NHSC’s projections.

Thankfully, we didn’t have to wonder long…

Buried on page 106 of the report was the following note:

“However, it is important to note that these cumulative estimates do not include the extent to which underlying demand and supply were out of balance in June 2001.”

Are you kidding me?!

What does that mean? This…

The NHSC set 2001 as the base year for computing the housing shortage.

Regardless of the actual supply and demand balance, the NHSC decided that at June 2001 the housing market was in perfect balance… no housing shortage and no surplus.

Put another way, even if there was a 100,000 housing surplus in 2001, the NHSC didn’t reflect this possibility in the numbers. According to them, the balance was zero.

Bottom line: if the NHSC’s balance of housing assumption in 2001 is wrong, then everything else is wrong… and the report isn’t worth the paper it’s printed on.

Of course, that won’t concern the mainstream (except Bloomberg News who asked your editor to comment yesterday). They’ll see the headline number that claims the housing shortage has “ballooned” and will get worse.

They’ll talk up the housing shortage and say high house prices are justified… and convince youngsters to buy now before it’s too late.

We’ve applied the Bull$#!t Test to the State of Supply report… and the speculation that homes in the Aussie housing market are somehow of superior quality – and both have failed to convince.

Cheers.
Kris

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The Great Australian Housing Shortage?

By MoneyMorning.com.au

You may remember an article in Business Spectator earlier this year. It was by HSBC economist, Paul Bloxham, on the Australian housing market titled, The Australian Housing Bubble Furphy.

Bloxham argued Australian house prices were justified because:

1. The quality of Aussie housing is high
2. The supply is limited
3. Public transport from outer suburbs is poor
4. And there’s a lack of cheap land at the fringe of major cities

It was the first point we had the biggest problem with.

Because it wasn’t supported by a jot of proof. Bloxham argued:

“First, the quality of the housing stock is high. Australia has the largest dwellings in the world, and they are of high quality. Estimates suggest that the average Australian dwelling is 214 square metres, and the real expenditure on new dwellings is now 60 per cent higher than it was 15 years ago, reflecting the increase in both the size and quality of dwellings.”

To our mind Bloxham had confused quantity of housing (the size of houses), with quality of housing (how good they are).

As you’d expect, the spruikers loved Bloxham’s article. It was the most syndicated and copied housing article of the year. It even spawned the famous “marvellous water views” comment from Fairfax journalist, Jessica Irvine.

In the Sydney Morning Herald, Irvine wrote:

“Compared to the rest of the world, we have high quality housing stock, with a high proportion of solidly constructed houses on big blocks. Most of the population is concentrated in a few capital cities with often marvellous water views.”

Again, there was no proof that Aussie housing was high quality. There was no reference to global housing studies… nothing from the Housing Industry Association… not a word from the millions of scholars around the world who clearly haven’t compared Aussie housing against housing in the U.S., U.K., France or Senegal.

Call us an old stick-in-the-mud. But when we see groundless claims we want to find out more… We want proof. Or at least an admission the argument has at least some subjectivity.

It’s a standard we set for ourselves… and we expect it from others. We call it the Bulls#!t Test. Whenever we read something (even if we’re inclined to agree with it), we take the view the writer is wrong. It’s up to them to convince us they’re right.

So imagine what we thought this morning when we saw this story in the Age:

“Heavy rainfall after a decade of drought is thought to have caused cracking in the walls of hundreds of new homes in Melbourne’s west, sparking calls for an overhaul of building standards from within the housing industry.”

The report continues…

“Affected suburbs include Melton, Werribee, Hoppers Crossing, Tarneit, Truganina, Deer Park, Point Cook, and Caroline Springs.”

Most of those suburbs have one thing in common. They’ve seen huge building growth over the past 30 years. In other words, these are the bigger and better houses the mainstream says are proof of high quality Aussie housing.

So based on this report, it seems your editor was right again.

The reason the mainstream didn’t provide proof about the high quality of Aussie housing is because there wasn’t any proof. Aussie housing isn’t better than any other Western nation… it’s just bigger. And bigger ain’t always better.

[Ed note: by the way, we’re not having a pop at the suburbs. We’re not some latte-sipping inner-city sort who hates suburbanites… OK, we sip lattes, so forget that. But we have lived (and still do) in the suburbs for most our life… and we like it there.]

All the while, one-by-one the excuses to support high Aussie house prices are knocked down and fail the Bulls#!t Test. Aussie houses aren’t of better quality. And despite the millions spent by the Australian federal government on three State of Supply reports, there’s still not one jot of proof to support the “housing shortage” claim either .

Cheers.
Kris

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Another Housing Market Myth Busted

By The Sizemore Letter

Listen to Charles Sizemore give his thoughts on the European debt crisis and on how to invest in 2012 on Mike Robertson’s Straight Talk Radio, hosted by Patrick Murphy live in New York.  Download the audio here.

Research in Motion (RIMM) reportedly turned down takeover ‘overtures’ from Amazon. om (AMZN) and other potential buyers.