A review of things you need to know before you go home on Thursday; no rate changes, job ads dip, NZ Super Fund stars, AU posts record trade surplus, swaps stable, NZD holds its own

The NZ Super Fund returned +13.2% in the 2016 (after costs, but before NZ tax). The Fund finished 2016 at a new high for the year-end of NZ$32.7 bln. Since inception in 2003 the Fund has returned 9.9% pa. Based on current portfolio settings, weighted towards growth assets, in keeping with its inter-generational objectives and long investment horizon, the Fund is expects to generate an average return of between eight and nine percent per annum over the long term. Few KiwiSaver fund managers have matched this.

According to some it's a bit of a struggle over the long term.

In their lifetime, 58% of equities fail to beat Treasury bills
Arizona State Professor says a few stocks create most returns Read more

And yet,

The S&P 500 Price index returned 9.84% in 2016 – and that is the number you’ll see quoted most often in the press. However, a more extensive calculation including dividends reveals that the true 2016 S&P 500 return was roughly 12.25%. Read more

And , from our great moments in world diplomacy file ; the Australian prime minister was chatting with US president Donald Trump today ... when it seems that the prez was fuming about Malcolm Turnbull's insistence that the USA honour an agreement to take 1500 refugees off Australian detention centres ...

... and the prez , having had his worst call of the day ( Vlad " the impaler " Putin was much more full of hilarious fun and jolly japes ) ... decided to fire the Ozzie leader by hanging up on him ...

" .... ahhhh ... Don ? ... Donald ? .... Mr President , are you still there ? .... sir ???? ..... "

All Americans should be deported/banned for 90 days "till we can figure out what the hell is going on here".
"They are murderers, rapists, drug dealers" and gun-toting religious maniacs.

Australia posted a large trade surplus for December today, almost twice what the markets were expecting. In fact, it was an all-time record. More than a third of the surplus related to "non-monetary gold", a consistently large contributor to their trade balance data. This result won't hurt the Aussie credit rating. It also gave its currency a boost.

I wonder if this outcome has a relationship to this news release.

Inflation across the world is beating analysts’ forecasts even before the potential effect from Donald Trump’s economic policies. The global Citi Inflation Surprise Index, which measures price surprises relative to market expectations, is at the highest in more than five years. The reading turned positive in December -- meaning inflation data were higher than expected -- for the first time since 2012. Read more

Other factors affirm an expectation of future demand is creating it's own demand dynamics today.

Since the crack spread is the wholesale price of gasoline above the wholesale price of oil, there was clearly a sense that demand for gas would outstrip demand for oil. Then, like now, it was believed that the overall economy, particularly consumer spending, was about to become robust, sharply accelerating in the close aftermath of QE3 (and 4). Like manufacturing PMI’s, there was a “sentiment premium” that in review was so clearly unjustified, but was dubious to begin with.

From that basis for comparison, crack spreads remaining high throughout this “reflation” period might make some sense normalized to these sorts of expectations. Refineries are essentially inviting energy flow to gasoline in anticipation that consumers will buy it, and buy a lot of it (given the record high starting point of inventory). Like the rest of “reflation”, however, that remains all in the future rather than as current reality. And so, like the near-recession conditions of last year, all that gasoline goes into storage awaiting either the expected robust economic rebound, or the “unexpected” if regular disappointment and all the adjustments that must follow, including much less oil being diverted from current storage into gasoline refineries and inventory.

The oil market as a whole remains, to my view, hedged far more to the latter possibility no matter how much wholesale gasoline prices might diverge. Read more

Whatever Aussie interest rate traders remain unperturbed.

Interest-rate traders are clinging to expectations the Reserve Bank will be on hold for at least a year, even after iron ore climbed about 50 percent over the past three months to levels last seen in 2014. Read more