What happened Wednesday

Business / news

A review of things you need to know before you sign off on Wednesday; jobs pressure rises, financial wellbeing wavers, Christchurch consents surge, swaps rise, NZD dives, & more

28th Sep 22, 4:09pm by David Chaston

Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).

MORTGAGE RATE CHANGES
None to report so far today.

TERM DEPOSIT RATE CHANGES
There were term deposit rate rises advised by HSBC, the Co-operative Bank, and the Bank of China.

EMPLOYMENT CONFIDENCE RISES
According to the Q3 survey by Westpac McDermott Miller, employment confidence rose in the September quarter, reaching a new post-pandemic high. Job openings remained high in this survey, but households still aren’t seeing much progress on earnings growth they say.

PAYROLL PRESSURES RISE
Along the same lines, Stats NZ released its monthly employment indicator data today for August. It too is suggesting that labour demand was high in the first two months of Q3, suggesting wage (and therefore domestic inflation) pressures will stay elevated. None of these latest jobs numbers reduce the pressure on the RBNZ. In fact, gross earnings in August were +10.2% higher that a year ago. That is +$1.3 bln more spending power in the economy, a level that presses on inflation. ($14.1 bln in August 2022 compared with $12.8 bln in August 2021.)

BATTENING DOWN THE HATCHES
ANZ released its Financial Wellbeing Indicator today, a survey they commissioned from Roy Morgan. They say "employment rates are high, savings levels are holding, and a lot of people are paying down their debts more quickly than they need to. These good financial wellbeing behaviours will help them weather the current stormy waters." But the report itself isn't as quite as sanguine as their headline summary suggests. The overall wellbeing indicator is the worst they have reported since this quarterly survey started in June 2019. And its getting worse. The "Feeling Comfortable" score has stayed at it worst-ever level. The measure of peoples’ ability to meet their commitments fell again. Resilience scores are ok however.

OVERSUPPLY GROWS
The Blackburn Management consultancy reported that there were 727 new residential housing consents issued in August across the three councils in the greater Christchurch area. That was more upbeat than was expected. They point out that so far this year, there have been three months with more than 700 dwellings consented (February, March, August) and this is greater than the previous highest number of consents issued (626), which was the absolute peak of the earthquake rebuild in November 2014. The unexpected rise is being driven by a huge surge in multi-unit apartments in Christchurch City. Blackburn is wary because they believe this is a market that is already oversupplied. In fact they report that most of these sales are to investors, and "sales of these units has slowed. With increasing interest rates and falling capital values, some investors may look to exit the market, which could leave some developers in a difficult position".

JUST CHECKING
We are watching the RBNZ series F5 for any signs the central bank has intervened in currency markets. No-one really expects them to be doing so and today's August data shows they haven't so far. But a very low NZD isn't helpful for them in meeting their inflation targets. They only have bad options on that front and attempting a currency intervention is one of them.

NO LOSS OF STEAM
Aussie retail sales held up better than expected in August, rising +0.6% from July at an annualised rate of +7.2%. Year on year it was up more than +19% but a weak base affects that comparison. The August rise was also more than markets were expecting (+0.4%).

ANOTHER GOLDEN WEEK
Just for your background and planning, China has another "Golden Week" national holiday coming up from October 1-7, 2022. Commercial life will be restricted. Internal travel will be heavy, although less this year around areas still affected by their zero-COVID policies. It is possible that after the Party Congress there will be some sort of easing of strict quarantining. When that happens, there will be a make-up surge in travel especially around family/village visits. Over the past ten years plus, more than 200 mln people have moved from their traditional rural homes into the big cities. The resulting annual village returns are monumental migrations.

SWAP RATES STILL FIRM
Wholesale swap rates are probably firmer again today on global forces but by more modest rises. But the key action comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up another +2 bps at 3.83% which is a new high since January 2015. The Australian 10 year bond yield is now at 4.12% and up +6 bps since yesterday. The China 10 year bond rate is down -1 bp from yesterday at 2.73%. The NZ Government 10 year bond rate is now at 4.31%, also down -1 bp and now the same as the earlier RBNZ fix for this bond at 4.31% which was up +2 bps from Friday. The UST 10 year is now at 3.99% and up another +11 bps from this time yesterday. That's a 14 year high.

THE EQUITIES MIXED
Wall Street ended its Tuesday trade down -0.2% on the S&P500 and unable to hold on to its morning rise. Tokyo is down -0.9% in early trade today. Hong Kong is down -0.9% at today's open. Shanghai is down -0.3% at its open. The ASX200 is also down -0.3% in early afternoon trade today. After yesterday's tough retreat, the NZX50 is up a modest +0.2% near the end of trade, but recovering very little of the prior days fall.

GOLD HOLDS
In early Asian trade, gold is at US$1,629/oz and a fall of just -US$3 from this time yesterday.

NZD GOES EVEN LOWER
The Kiwi dollar softened further today, falling -90 bps from this time yesterday to just under 56 USc level at the start of the pandemic. Against the AUD we are down at 87.4 AUc. Against the euro we are now at 58.7 euro cents and down -30 bps. That all means our TWI-5 is at 67 and down -60 bps from this time yesterday.

BITCOIN SOFT
Bitcoin has fallen today and is now at US$19,084 and down -2.4% and back to where we started after the long weekend. Volatility over the past 24 hours has been very high at just under +/- 4.1%.

Daily exchange rates

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Source: RBNZ

Source: CoinDesk

Daily swap rates

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Source: NZFMA

This soil moisture chart is animated here.

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132 Comments

by bw | 28th Sep 22, 4:18pm 1664335087

Low 0.5568. Next week's OCR should be fun.

by realterms | 28th Sep 22, 4:30pm 1664335810

You really think they'll go more than 50bps? Not what they *should* do, mind, what they *will* do.

by hum | 28th Sep 22, 4:41pm 1664336481

1 full point would be the minimum

by Pa1nter | 28th Sep 22, 6:30pm 1664343055

It seems like at this point it's a race to build buffer in order to print some more cash when it all goes tits up.

by bw | 28th Sep 22, 4:51pm 1664337099

That's the conundrum.

At some stage, they are going to have to admit they are behind the 8-ball again. Will that be next week? I guess we're about to find out.

by J.C. | 28th Sep 22, 4:53pm 1664337229

You really think they'll go more than 50bps? Not what they *should* do, mind, what they *will* do.

Depends what Kaumatua Orr reads in the chicken bones.

(Note: That is not an ignorant dig at Maori spirituality. It's an attempt at humour directed at the RBNZ's newfound focus on spirituality).

by Pragmatist | 28th Sep 22, 5:06pm 1664337995

Is it KFC chicken, or a Costco whole roast chicken.. enquiring minds want to know how well managed our money is. /s

by Baywatch | 28th Sep 22, 6:31pm 1664343106

DXY closing in on 115..

by keenaucklandobserver | 28th Sep 22, 5:40pm 1664340048

They are going to really need that spirituality.

by vman | 28th Sep 22, 6:43pm 1664343792

Well maybe that's Luxon's secret weapon,he seems to have no new ideas,but perhaps he is relying on his direct line to the big guy upstairs for a bit of spiritual intervention.

by Rex Pat | 28th Sep 22, 7:37pm 1664347078

Could he be any worse than Ardern? I hope we get to find out because it’s a low bar. Ardern is the worst PM in living memory, leading the worst government in living memory.

by singautim | 28th Sep 22, 8:15pm 1664349319

I'm no fan but she is good at PR and is brighter than her colleagues. Can't blame her for the quality of her colleagues.

by Harvey W | 28th Sep 22, 9:51pm 1664355066

She's fully responsible for how her colleaques perform...the buck stops with her

by nigelh | 28th Sep 22, 7:49pm 1664347794

hocus-pokus fits both

by taimaiakka0 | 28th Sep 22, 6:05pm 1664341500

If they come out and follow least regret policy for once, should go higher than 0.5% as in need of shock (unexpected) treatment.

In next rate review after 4th Oct, can go soft but need as of today, is to go full 1%, knowing RBNZ, even the thought of raising full 1% will make them wet their paints, so why not 0.75%.

Will not be surprsed if NZ$ falls below 50cents to US$ or may be below 40cents as had happened earlier.

Wait and Watch. Interesting time ahead.

by keenaucklandobserver | 28th Sep 22, 6:58pm 1664344706

Least regrets and then 0.5%? They are really going to regret it. I would not believe that the seriously adverse movements in the NZD have been anticipated by the RBNZ and factored into their projections for the terminal point of the OCR.

What is the worst that can happen? That spending is cut back instantly due to higher interest rates? Great - then you would have inflation under control quickly and they satisfy their inflation-fighting mandate, and this opens up a path to reducing the OCR faster in the nearer future.

If they don't and the currency continues to plunge, you run a risk of a run on the currency due to the loss of investor confidence (just look at the UK) and definitely face the consequences of imported inflation - in which case you end up having to hike anyway except that in that instance, you are fighting the twin forces of a weakening currency and inflation.

Do your job, Adrian. Stop lying so blatantly when the undisputed facts of a weak NZD vis-a-vis every other currency (and the USD) are laid bare for all to see.

by JimboJones | 28th Sep 22, 7:21pm 1664346109

I think we are at a point where a higher OCR won’t help the NZD at all. Which currency would you buy, one at 4% OCR and full employment and growth, or one at 5% OCR and unemployment and recession? Venezuela has an OCR over 50%, their currency must be amazing.

by HouseMouse | 28th Sep 22, 8:16pm 1664349374

Agree. Or at least, it won’t help much.

And will generate some very negative economic consequences.

by keenaucklandobserver | 28th Sep 22, 8:42pm 1664350932

Your 'full employment' at 4% OCR will soon disappear with a currency that is being devalued. Why? Current account deficit, huge imported inflation (which reduces spending and 'growth' any way) accompanied by a run on the currency due to loss of investors' confidence and a flight to safety to the USD (or any other currency). And then you eventually end up like Venezuela where the RBNZ money printers go BRRRR to no avail.

Take the pain now, restructure and restore investors' confidence once the government is doing a great job. Your strengthening currency will then slow imported inflation and then you may likely exit the hiking cycle faster or earlier than anyone else.

I can't think of any examples whereby the currency is being devalued against every other currency (not just the USD) on a relative basis and the economy continues to outperform. Can you?

by Squishy | 28th Sep 22, 8:27pm 1664350067

NZD has been taking a beating for a while and RBNZ haven't intervened. Team transitory still "looking through" not just inflation but future inflation.

by fortunr | 28th Sep 22, 4:18pm 1664335131

The NZ dollar is being utterly trashed. Time for an emergency OCR rise to 4%, and right now. The world is about to enter a currency war, where countries like the US will be trying to export inflation through currency upvaluation, and the RBNZ must not be late nor timid in supporting the NZ dollar. The OCR peak will have to go at or above 5%, and it will have stay at that level for quite some time, possibly a couple of years or longer.

by bw | 28th Sep 22, 4:20pm 1664335251

Perhaps a Cost of Debt rate war as well. A$, ¥ and £ 'following' the Kiwi this arvo. Who will out-do whom with their attractive interest rate offering?

by Snow | 28th Sep 22, 4:30pm 1664335855

Do you think it possible that the RBNZ will extend the FLP or are they 100% committed to wrapping it up in December?

by Market Interest | 28th Sep 22, 4:40pm 1664336439

Not a chance. They'd have canceled it already if they hadn't committed to seeing it through. It's all about regaining their integrity now, after the disastrous consequences of previous decisions.

by keithwoodford | 28th Sep 22, 4:43pm 1664336602

There is no logical reason to extend the FLP. It is a simple form of digital money printing at a time when that is the last thing that we need.

The QE confetti throwing has already stopped except for the FLP.

To now start to bring things under control, the speed of quantitative tightening by mopping up the LSAP confetti (which has already started in a minor way), now needs to significantly increase.

KeithW

by realterms | 28th Sep 22, 4:46pm 1664336773

> mopping up the LSAP confetti

at a significant loss

by keithwoodford | 28th Sep 22, 5:39pm 1664339998

It will show as a loss on the RBNZ balance sheet, with bonds sold for less than they were purchased, but this does not in itself represent a real loss of national wealth.

KeithW

by Audaxes | 28th Sep 22, 7:11pm 1664345486

The government has to extinguish the RBNZ purchase price liability to banks which was surely higher than the issue price of the deposit created and credited to the government at the time of bank syndication and tender events of each and every issue purchased under the LSAP programme. Hence the Crown Indemnity for the Large Scale Asset Purchase Programme - currently revealed at $9.083bn. Link

by keithwoodford | 28th Sep 22, 8:58pm 1664351917

Once the RBNZ purchased the bond from the financial institutions that had originally bought them from the Government, then the only partners to the bonds were the two arms of the state - Govt and the RB. Then it is simply a case of the Government deciding how it was going to fund the repurchase. Typically that funding comes from the issue of new Treasury bonds to the market. Alternatively it could come from taxation. Either way, the net effect is that there has been quantitative tightening, with funds going from the market to the RB to cancel the original bond.

KeithW

by Snow | 28th Sep 22, 4:54pm 1664337296

Thanks Keith. My limited understanding would agree I just thought it would be a way to help banks suppress interest rates at a precarious time? Or is that a complete misunderstanding on how the FLP works?

by lowercase capitalist | 28th Sep 22, 4:57pm 1664337475

Suppressing interest rates is basically what the FLP does but why would they want to do that?

by Snow | 28th Sep 22, 5:01pm 1664337665

Protect mortgage holders was my angle. I realise the RB's mandate isn't specifically related to housing but the way things are looking the OCR could be going a bit north of where the RB and banks are predicting (publicly at least).

by lowercase capitalist | 28th Sep 22, 6:05pm 1664341548

Protecting mortgage holders would run counter to their other goals though.

Mortgage holders having to spend more on their loans means less to spend elsewhere, unpalatable as that may be.

by HGWR | 28th Sep 22, 6:07pm 1664341627

Artificial assistance for borrowers is at the root of our inflation and housing crises, why on earth would we want more of that?

by Snow | 28th Sep 22, 6:24pm 1664342676

Yep I agree with all of that and am not advocating for more of the same. Just thinking out loud (and trying to learn as we go) that there may need to be a balance struck if these rates continue because the housing market will get nailed more so than expected and ergo the NZ economy. (I’ve been in IO’s camp for a number of years whereby we shouldn’t have put ourselves in this debt exposed position in the first place).

by Solid_Granite | 28th Sep 22, 7:32pm 1664346755

Agreed, without the FLP banks would have to offer much higher interest rates to their customers right now. Too many stressed homeowners and the banks would come under pressure. I fear it's a bank bailout in slow motion, and I wouldn't be surprised if they soon announce the FLP program will continue into next year.

by Rob Reid | 28th Sep 22, 9:36pm 1664354215

It would need a new name though, to give the illusion it was not just a continuation of the FLP.

How about Financial Liquidity Provision. FLP - Oh oops!

by J.C. | 28th Sep 22, 5:26pm 1664339169

The QE confetti throwing has already stopped except for the FLP.

Just a quick comment about QE. Growth in the broad money supply in Japan has been far lower than in the U.S. and the EU from 2000 to 2021, despite the attention of Japan's QE activity.

Japan: +80%

U.S.: +300%

EU: +230%

https://www.lynalden.com/economic-japanification/

by keithwoodford | 28th Sep 22, 5:36pm 1664339783

I agree that factors other than QE are relevant to the broad money supply and hence to inflation. That is also why caution is appropriate when interpreting the Japan situation. One key difference is that Japan ran large current account surpluses and this contrasts greatly to the NZ situation. Another difference relates to Japanese consumption versus savings behaviours relative to Kiwi behaviours. One of the big risks in NZ is the large amount of money held in various deposit accounts and with this money essentially sitting idle in bank settlement accounts. Right now we are in very dangerous territory. Unfortunately,in the current situation, a high OCR is fundamental to holding further asset inflation in check.

KeithW

by Yvil | 28th Sep 22, 6:00pm 1664341207

Do you mean the risk is that large amounts of deposits in NZ get withdrawn all at the same time? Probably by foreign depositors who are running scared of the collapsing NZD and the awful NZ trade deficit? Do I understand this correctly?

by Rex Pat | 28th Sep 22, 6:11pm 1664341912

I took it to mean that many of us have good bank account balances and there is a risk of it being spent, fuelling inflation, if interest rates are not kept high. I’m in the UK right now, hammering the debit card for anything with value to me, as it’s the last reasonable currency exchange rate left. The remainder is going on TDs. It’s wealth preservation at top of mind. The financial tide is going out.

by Uninterested | 28th Sep 22, 6:30pm 1664343047

Kiwibank and kiwibonds for me..... In advance of the stupid deposit insurance (South Canterbury Finance) bullkrappo.

by keithwoodford | 28th Sep 22, 6:33pm 1664343229

Yvil,

One of the points I am making here is that there is a lot of money held in deposits accounts, both current and term, which the banks have not on-lent. Hence the high settlement accounts the banks hold with the RBNZ - roughly 50 billion last time I looked (I would need to check the exact number) compared to less than 10 billion pre-COVID. Because of the multiplier effect, this has the potential to be on-lent multiple times. The reason people are holding significant bank deposits is because they have a lack of confidence in relation to investing it elsewhere. And if they did invest it in shares or properties than that sets off another round of asset inflation.

Unfortunately there is no painless solution to the situation we have created. That is why I was critical including here at interest.co.nz, starting more than two years, of the extent of QE and the over enthusiasm at that time for ultra low interest rates. Alas, we cooked our goose at that time, building on some already existing economic flames of an unbalanced economy which had been building over many years. But I was somewhat of a lonely voice in the wilderness.

KeithW

by J.C. | 28th Sep 22, 6:39pm 1664343579

That is why I was critical including here at interest.co.nz, starting more than two years, of the extent of QE and the over enthusiasm at that time for ultra low interest rates.

A steady stream of drunken sailors willing to borrow from banks who have no fear lending into existence on property.

by Yvil | 28th Sep 22, 6:43pm 1664343784

Thanks for your reply Keith, I still struggle to understand why it's bad to have so much money in deposits in NZ?

by Nifty1 | 28th Sep 22, 7:02pm 1664344928

by keithwoodford | 28th Sep 22, 6:56pm 1664344586

Yvil,

The problem is not with the deposits themselves as long as the banks were lending that for productive purposes. The problem is that too much of this is simply sitting in settlement accounts with the RBNZ. So there is lots of commercial bank liquidity held at the RBNZ which is always looking for another home. And there lies the potential for a further asset bubble. The banks are reasonably happy to leave it in their settlement accounts where it earns interest at the OCR, rather than on-lending it to further pump up an asset bubble, as long as the OCR is at a 'high' rate. But the RBNZ also knows that with very high settlement accounts, the RBNZ will be constrained when the next recession does come. And it is coming down the track!

KeithW

by Yvil | 28th Sep 22, 8:00pm 1664348422

Many thanks for your reply Keith, much appreciated, I personally consider you the most knowledgeable commenter on this site. Thank you.

by Fossil Lover | 29th Sep 22, 7:13am 1664388831

Because it is getting inflated away to zero and the fiat NZ dollar is imploding.

To keep money in a bank, interest rates need to be above inflation. That means 12 %, minimum.

by Audaxes | 28th Sep 22, 7:54pm 1664348079

What multiplier effect? There is no fractional reserve banking in NZ - the limiting control of bank credit creation moved from the asset side of the ledger to the liability side many decades ago.

According to the Reserve Bank, the new capital requirements mean banks will need to contribute $12 of their shareholders' money for every $100 of lending up from $8 now, with depositors and creditors providing the rest.

by keithwoodford | 28th Sep 22, 11:00pm 1664359243

The shareholder capital requirements effectively act as an alternative to the fractional reserve. It is a different mechanism, but it puts a throttle on the effective multiplier.

KeithW

by Fluffybunny | 28th Sep 22, 7:34pm 1664346886

I imagine it's somewhat hard to promote a different viewpoint in the face Of conventional msm which is bought by a mixture of RE industry advertising, and Govt 55mil hand-outs..

Still. It's Only really that bad if you believed the exponential growth would last forever without consequence and loaded up on debt accordingly.

For My Mind. Since 2008 CBs have become Far too overconfident on the ability to create money without inflation etc. Perhaps a little Blood right now would be a good thing. A gentle reminder to stick to a more conservative approach Next Time.

by Audaxes | 28th Sep 22, 6:18pm 1664342283

QT releases LSAP securities back into the market.

Currently NZDM is buying these securities from RBNZ and extinguishing them.

by keithwoodford | 28th Sep 22, 6:43pm 1664343839

QT occurs either by the RBNZ releasing to the market or selling to the Government. Currently by agreement between the Government and the RBNZ the bonds are sold directly to the Government. But this is only occurring at a moderate level. And the Treasury securities when sold back to Treasury are paid for by the Treasury arm of Government, with this in turn requiring funding by the Govt either using its own settlement funds at the RBNZ or issuing new debt to the market. That is how the tightening occurs.

I agree with those actions but argue that the level thereof needs to increase.

KeithW

by Audaxes | 28th Sep 22, 7:43pm 1664347435

Not at all. The bonds are extinguished under the current NZDM programme, whereas the bonds QTed in the states are still issued and traded in the market place. The original asset swap to exchange securities for reserves is just reversed in QT with the original coupon and issue prices remaining constant.

We have the possibility in NZ of NZDM issuing new debt to extinguish old term debt at a remarkably higher coupon rate than the bonds extinguished. Banks are lapping it up - borrowing short from government beneficiaries to lend long at a better spread to the government.

by JimboJones | 28th Sep 22, 7:40pm 1664347205

The logical reason would be to support a cash rate well above the US (to aid the NZD) while also having mortgage rates that the locals can actually afford.

by EdwardD | 28th Sep 22, 5:38pm 1664339929

I hope not. They should have shut off the tap to this cheap money months ago.

by CeeJ | 28th Sep 22, 6:30pm 1664343028

It would seem like times like this is when having a common currency with allies is useful? For a larger stronger trading block etc.

by WellingtonInvestor | 28th Sep 22, 4:36pm 1664336194

As NZs OCR is higher than most other countries, I am surprised the NZD is so weak. Yes the OCR needs to go up. 5% is still a very low ORC rate historically. So not sure why i would need to go down. Cheap money just pumps up house prices and is how we got into this mess in the first place.

by keenaucklandobserver | 28th Sep 22, 4:44pm 1664336678

The OCR at 3% is currently sitting lower than the Fed Reserve Rate. Who in the right mind would take up the NZD? Given the well-documented fed rate increase, it is arguably remiss of the RBNZ to delay hiking (or not hold an emergency meeting to hike the OCR to maintain the NZD. Now, you end up fighting an uphill battle that could have been avoided in the first place. So much for being the 'first to hike'.

by WellingtonInvestor | 28th Sep 22, 4:52pm 1664337131

NZ should really be at least at 3.5% by now., but I think they delayed at least 1 rise last year due to covid lockdown in Auckland, and I don't think they want to rise it faster than 0.5% steps. But NZers are paying far more for stuff due to them letting inflation get out of control with the emergency low OCR for too long. They kinda failed at the one thing they were meant to do, to keep inflation within a certain band.

by keenaucklandobserver | 28th Sep 22, 7:01pm 1664344915

NZers are paying far more for stuff due to the low OCR then and due to the low OCR today.

There's no reason that they should stick with the 0.5% increments when circumstances call for a different treatment.

We shall see if they ever learn from their mistakes. Somehow I doubt it. Just short the NZD.

by KH | 28th Sep 22, 5:01pm 1664337704

Trade deficit counts methinks.

Or maybe I am just old fashioned in this age of financial fantasy.

by keithwoodford | 28th Sep 22, 11:02pm 1664359332

Yes, trade deficits do count.

In NZ's case, the extent of the trade deficit, which flows through to the external current account deficit, is a reflection of a fundamental structural problem in the NZ economy. And that is why we are in a weak position to deal with the current inflationary burst and with there being no painless solutions.

KeithW

by Fossil Lover | 29th Sep 22, 7:22am 1664389328

Ronald Reagan. 'Deficits don't Matter'. Only when you have the worlds reserve currency, Ronnie.

by HouseMouse | 28th Sep 22, 4:36pm 1664336187

NZSX50 down 0.71% as of 4.35pm

by chebbo | 28th Sep 22, 5:11pm 1664338306

Closed down 0.82%, pretty big daily move for the NZX50. There will be some sad looking 12-month Kiwisaver charts out there.

by HouseMouse | 28th Sep 22, 5:45pm 1664340328

One of the best pieces of advice I have ever given my son was for him to not buy shares late last year.

by Albert2020 | 28th Sep 22, 5:58pm 1664341121

Telling your son to dollar cost average into a low fee index fund over the next 40 years will enrich him far more than any advice you can give him about timing the market HM.

by Pa1nter | 28th Sep 22, 6:34pm 1664343265

What's the saying "you miss every ball you don't swing at"?

by Uninterested | 28th Sep 22, 6:36pm 1664343384

Obviously an avid Mary Holm disciple.

A stuck record who in my view should have been replaced with others with more flexible (original) views more than 10 yrs ago.

by J.C. | 28th Sep 22, 6:42pm 1664343722

Obviously an avid Mary Holm disciple.

A stuck record who in my view should have been replaced with others with more flexible (original) views more than 10 yrs ago.

Nice person but her advice is typical 60/40 stuff. Ignores what's really going on with the monetary system.

by HouseMouse | 28th Sep 22, 6:49pm 1664344184

Exactly.

I say bollocks to not being able to time markets, if not precisely then close enough to do well.

As well as selling my shares I also changed my KiwiSaver to a cash fund early this year. I bet Mary would also say I should have kept it in a growth fund.

But why?

I can flick it back to a growth fund with a flick of a switch (or at least a quick phone call).

In the mean time I haven’t incurred big losses in my KS funds.

by Albert2020 | 28th Sep 22, 7:09pm 1664345373

That’s the mentality that will lose you hundreds of thousands of dollars over your lifetime..more concerned about negating the losses than missing out on the gains. Read “The simple path to wealth” by JL Collins, in 20 years time you will thank me for it.

by HouseMouse | 28th Sep 22, 7:29pm 1664346586

How do you know I won’t be able to cash in on gains? If not all of the time then at least a decent chunk.

It was very clear to me, by reading what people like Jeremy Grantham have to say, that it was going to be very much a bear market this year.

I really don’t see why, in that context, shifting my KS to a cash fund was a bad move.

When things are much less easy to forecast, I am very happy to leave my funds in a more aggressive fund and let things play out over time.

by J.C. | 28th Sep 22, 7:09pm 1664345382

As well as selling my shares I also changed my KiwiSaver to a cash fund early this year. I bet Mary would also say I should have kept it in a growth fund.

Mary was pumping Kiwisaver hard in the early days. I think she was possibly a paid influencer.

by JimboJones | 28th Sep 22, 7:42pm 1664347354

I’ve tried exactly that, lost heaps when I went to cash fund over Covid. It’s not possible, if you win it’s just luck.

by HouseMouse | 28th Sep 22, 7:49pm 1664347746

disagree.

It was very easy to see that this year would be bad for shares. High inflation environments when interest rates are being hiked aggressively always are.

But I agree most of the time it’s a waste of time trying to time the market.

But why not cash in when it’s a safe bet?

by Albert2020 | 28th Sep 22, 6:51pm 1664344309

JL Collins actually

by EdwardD | 28th Sep 22, 6:47pm 1664344028

I agree about not purchasing shares at the present time, however, I worked out today that my shares (because they are all US shares) have been a great investment. I wish I had bought more as I certainly can't afford to now.

by keenaucklandobserver | 28th Sep 22, 4:41pm 1664336476

Low, and even lower against USD and every other currency. But Orr said 'nothing to look here'.

The RBNZ series F5 shows a 12 billion capacity to intervene. Good luck with that. A really large hedge fund can probably wipe RBNZ's floor on this.

The focus on the USD is an entire red herring given that other currencies are weakening too - the real focus should be the NZD's weakness against all other currencies. That itself is the ultimate indictment, judgement-free, on the country's economy vs other countries in similar situations (or worse like the EU which has a war and energy crisis on its hands).

by realterms | 28th Sep 22, 4:47pm 1664336854

Yes TWI more important than the USD cross. But that hardly looks better.

by keenaucklandobserver | 28th Sep 22, 5:01pm 1664337693

I like your massive under-statement - "that hardly looks better". :) The trendline appears to show one and only trend - downwards.

The continued focus on other countries' economic policies is entirely misplaced. Focus on your own backyard first and deal with the pressing issue!

by Sam B | 28th Sep 22, 4:43pm 1664336630

Inflation isn’t going anywhere with those retail numbers. Goodbye NZD, nice knowing you.

by J.C. | 28th Sep 22, 5:02pm 1664337758

Granny Herald does "Blockchain, the tech that could but didn't deliver". Not a subscriber so don't know the narrative.

https://www.nzherald.co.nz/business/juha-saarinen-blockchain-the-tech-t…

by Waikatohome | 28th Sep 22, 5:02pm 1664337765

https://www.theguardian.com/politics/2022/sep/27/kwasi-kwartengs-tax-cuts-likely-to-increase-inequality-imf-says?amp

I wonder if ACT and National are keeping an eye on the chaos caused in the UK by the Conservative governments cuts to income taxes for higher earners and the removal of caps on bankers bonuses. It turns out that many of the high earners didn't want the tax back, they wanted to see more responsible spending on areas like health and education, and more help for those struggling with energy bills. It seems that our right wing politicians think their voter base is greedier than they actually are. Time for a little more compassionate conservatism and less of the winner takes all mentality.

by singautim | 28th Sep 22, 5:18pm 1664338685

Sounds like a good policy that will reduce wealth inequality. Currency drops in value then the middle class, the rich and really rich all get poorer. Meanwhile those who invested in export businesses do well. If you have debt or roughly zero wealth then inflation discourages buying imported high price items such as a TV or car so you are more likely to spend whatever you do earn on local products and services. Of course this all depends on the govt retaining inflation proofing benefits.

by Rex Pat | 28th Sep 22, 6:05pm 1664341529

I am in the UK, on holiday, and watching the news. It’s scary watching their Labour Politicians spouting absolute drivel in response. Let’s not pretend the left has any insights. They even said the Chancellor was “superficially Black”. As morally bankrupt as Ardern and Co.

by RickStrauss | 28th Sep 22, 6:32pm 1664343150

Tories in power for 12 years now, and delivered Brexit by lying to the population. Not really any need to compare theoretical actions from others.

by vman | 28th Sep 22, 6:55pm 1664344522

And let's not pretend in NZ that the right have any insights either.

by singautim | 28th Sep 22, 8:19pm 1664349544

The right always has one insight - do anything and it might have unanticipated and unwanted results.

by Baywatch | 28th Sep 22, 7:07pm 1664345271

Your scared by the UK opposition rather than the incumbent Torys...stone the crows!

by agnostium | 28th Sep 22, 7:08pm 1664345317

Your narrow minded view of left=bad, right=good, means you cannot be taken seriously Pat.

by Rex Pat | 28th Sep 22, 7:46pm 1664347613

Never met a leftie I felt safe leaving my wallet around. Politics of envy. The current lot are the worst PM and Government in living memory. Their voters are being massively impacted. All the left have now is ‘whataboutism’

by Waikatohome | 28th Sep 22, 10:00pm 1664355613

This politics of envy stuff is nonsense. I am not envious of anyone, I just want to see others have the same opportunities that I had, a warm and safe home, a good state education and a choice of careers.

by northman46 | 28th Sep 22, 11:34pm 1664361297

Sounds like the sort of person who squeals "No! It's all mine! You're all just greedy!" when it's time to cut the cake at his own birthday party.

Torys trash the economy and crash the pound, and Rex Pat's big brain comes to the conclusion "wow, the people who want to undo this are pretty scary". Pressumably as he applies his clown make up.

by northman46 | 29th Sep 22, 9:42am 1664397720

Whataboutism. A bit like looking at what Truss has done this week and saying "yeah but what about the other guys! Scary stuff".

by HouseMouse | 28th Sep 22, 7:34pm 1664346892

All political parties, everywhere, seem to be basketcases right now.

by Waikatohome | 28th Sep 22, 7:51pm 1664347901

I agree, the political class on both sides have lost touch. It is just a game to them.

by J.C. | 28th Sep 22, 5:53pm 1664340781

Wolfie Richter takes a look at the U.S. housing bubble and a possible unwinding. All the "rich" cities such as Seattle and San Francisco is where all the action is taking place.

https://wolfstreet.com/2022/09/27/the-most-splendid-housing-bubbles-in-…;

by chebbo | 28th Sep 22, 5:21pm 1664338861

All swaps now at 8+ year highs, having passed the peak set back in June this year. 3 and 4 year durations at 12 year highs. 1 and 2 year durations at levels not seen since the GFC.

by realterms | 28th Sep 22, 5:44pm 1664340260

I'm actually surprised swaps haven't moved more today. Treasuries are soaring.

by Independent_Observer | 28th Sep 22, 6:31pm 1664343080

Lawrence Summers: 'The US 10 year rate just crossed above 4 percent. Mortgage rates comfortably exceed 7 percent. We are now in new financial territory.'

https://twitter.com/LHSummers/status/1574947421959819264?s=20&t=zqMAldx…

I'm not sure how the Fed and other central bankers are going to achieve this 'soft landing'.

by Justa comment | 28th Sep 22, 7:31pm 1664346660

yes US 10yr will move past 4% tonight

by jo147 | 28th Sep 22, 5:24pm 1664339070

I understand australia has a positive trade balance while nz runs a deficit. Is there any other reason I don't understand why the nzd has dropped so much against the Australian? Their ocr is below ours. If we dropped equally against the usd then we should maintain our rate between nzd and aud? What am I missing? Trying to decide when to buy event tickets in aud for trip in November.

by keithwoodford | 28th Sep 22, 5:47pm 1664340455

The Australian external current account surplus compared to a large NZ deficit is precisely why I have been expecting for the last year to see the NZD depreciating relative to the AUD, and this has been happening. I think this still has some way to go over coming months and years, but the timing of the movements is determined by the financial reef fish and impossible to predict.

KeithW

by jo147 | 28th Sep 22, 7:04pm 1664345088

Thank you KeithW. Really appreciate all your comments, articles and insights that you post. Read them with great attention even when some of it is outside my knowledge and understanding.

by Baywatch | 28th Sep 22, 5:31pm 1664339506

You know you have reached a unique time in history when bitcoin suddenly is less volatile than fiat currencies

by keenaucklandobserver | 28th Sep 22, 5:43pm 1664340223

You know it's a really unique time when large scale losses on the US stock exchanges actually translate into a positive P&L in NZD terms.

by J.C. | 28th Sep 22, 5:54pm 1664340874

You know you have reached a unique time in history when bitcoin suddenly is less volatile than fiat currencies

Volatility in BTC has been off the hook in the past 36 hours.

by Baywatch | 28th Sep 22, 6:34pm 1664343260

Really..don't think so 1.7% is anything to be alarmed about?

by Uninterested | 28th Sep 22, 6:42pm 1664343768

I am not alarmed because I do not own any bitcoin.

by Carlos67 | 28th Sep 22, 5:59pm 1664341146

Funniest comment of the week, you must have missed the fall from $67K to under $20K in a year. Sure glad my Fiat has not done that or I would be ship wrecked right now.

by J.C. | 28th Sep 22, 6:06pm 1664341584

Funniest comment of the week, you must have missed the fall from $67K to under $20K in a year. Sure glad my Fiat has not done that or I would be ship wrecked right now.

Been lower than $20K. And more extreme forecasts are for $3K. Not for the faint hearted.

by lowercase capitalist | 28th Sep 22, 6:16pm 1664342165

Assuming your fiat is NZD its down about 20% against the USD this year. No where as bad as BTC but considering the point of fiat is to be a stable means of exchange thats pretty poor.

Everyone knows bitcoin is volatile so a drop like this shouldn't be too hard on anyone.

by chebbo | 28th Sep 22, 8:05pm 1664348724

The difference is that you don't have to convert NZD to another currency in order to be able to spend it.

A loaf of NZ bread isn't costing me 20% more than it did last year. If I paid in BTC, it would have more than doubled in price.

by Baywatch | 28th Sep 22, 6:35pm 1664343352

The best performing currency in 2022...USD and BTC..but Carlos you keep staking those NZDsssss

by Carlos67 | 28th Sep 22, 5:55pm 1664340901

I heard that banks in the UK have stopped lending as of yesterday. They simply do not know where this is all heading (Well they do and that's why they have stopped lending) and need some reassurance.

by Rex Pat | 28th Sep 22, 6:15pm 1664342118

The news here in the UK is reporting some mortgage products being pulled, especially higher LTV and fixed rate products.

by Nifty1 | 28th Sep 22, 6:23pm 1664342611

Heard from where?

by HouseMouse | 28th Sep 22, 6:55pm 1664344531

Yes I read that with interest yesterday.

And it made me wonder why it’s not being done here.

Perhaps inflation is far worse there than here and interest rates have potential to be increased far more aggressively there?

by Three Veg | 28th Sep 22, 6:31pm 1664343108

This would be a great time to bring back the commercial cds charts on the site for the Aussie banks…

by Independent_Observer | 28th Sep 22, 6:33pm 1664343194

US Corporate bonds now priced lower than during the 2020 Covid crash.

https://pbs.twimg.com/media/Fdp53O3XoAEkEJ-?format=png&name=900x900

by Independent_Observer | 28th Sep 22, 6:35pm 1664343311

Western governments need to rapidly reduce fiscal spending...the lack of harmony between fiscal and monetary policy at present isn't intelligent.

The tax cuts in the UK, without an associated drop in fiscal spending is plain stupid.

by Zen20 | 28th Sep 22, 6:41pm 1664343701

Parity party?

by Independent_Observer | 28th Sep 22, 6:42pm 1664343745

ANZ/Zollner forecasting the OCR to rise by 50bps next week.

https://twitter.com/sharon_zollner/status/1574924525112037377?s=20&t=zq…

I do wonder if we drop to approx 50c with the USD by the end of the week if they will change their tune.

by keenaucklandobserver | 28th Sep 22, 6:51pm 1664344265

If they raise by 50 bps, then below 50c becomes really likely. You will just be 25bps above the Fed Rate.

by Happy_Medium | 28th Sep 22, 7:14pm 1664345668

I’ve been curious about how the NZD strength correlates with the stock market. i.e. in 2000, 2008, 2015, 2020 the NZD bottomed out pretty much where the stock market bottomed out (when compared to USD).

Is it safe to say there’s risk of further NZD weakness until the stock market reaches true bottom, or is it more complicated than that? If so, I find it hard to see any real support for NZD while the US is tightening so aggressively.

by Squishy | 28th Sep 22, 8:24pm 1664349874

If the Great British Pound (GBP) declines below the US Dollar (USD), will we have to start calling it an Ounce?

by chebbo | 28th Sep 22, 8:34pm 1664350465

We could start calling it "Deer Balls", seeing as it's under a buck...

by Snow | 28th Sep 22, 8:50pm 1664351417

Not a doe then?

by chebbo | 28th Sep 22, 9:36pm 1664354205

Could work. I've heard of people making some hard-earned doe.