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/LOAN RATE CHANGES
No changes to report again today.
TERM DEPOSIT/SAVINGS RATE CHANGES
Liberty Finance have raised TD offers by between +20 bps and +30 bps.
NO OVERALL CHANGE, BUT WIDE VARIANCES
After the local dairy season has started on a positive note with production levels up in September (and probably also in October), the overnight dairy auction came in with prices unchanged overall. But they fell in NZD. But there were big variances by product: cheddar cheese is now at its lowest price since September 2020 after falling -9.7% from two weeks ago. SMP prices also slipped, but WMP prices rose. No analyst changed the farm gate payout forecast after today's auction, but eyes are squarely on lower international production due to weather challenges, including in New Zealand. But for now, local feed and prospects are starting very positively. 'Bullish' (?) sentiment remains because of the global production issues many countries face.
CAUGHT BEING CRIMINALLY IRRESPONSIBLE
Binance's 'willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,' Janet Yellen says as the US Treasury Department fined the company US$4 bln, and forced its CEO to step down after pleading guilty to criminal and civil charges. Separately, the SEC is suing crypto platform Kraken for operating an unlicensed crypto platform.
A NEW NZ STABLECOIN
Meanwhile, EasyCrypto has launched a NZ-dollar backed stablecoin and wallet. The claim is the related wallet is an elegant solution to help protect people’s holdings and avoid problems such as those that occurred with the collapse of FTX.
HARDLY ENCOURAGING
ANZ's analysis of transactions that run through its card system isn't especially encouraging. Spending growth in most categories was positive in October. However, the lift versus last month has more to do with base effects (a very weak July falling out of the 3-month average) than any real strength in spending in the month of October, they observed. The tourism rebound has flattened out somewhat, but recent growth rates were never going to be sustainable they said. Clothing retail remains particularly weak, reflecting more cautious consumers. A lot hangs on Christmas.
UPGRADED
Moody's has upgraded Air New Zealand for its issuer rating and senior unsecured debt rating from Baa2 to Baa1, outlook Stable. The rating action reflects Moody's view that Air NZ's standalone credit profile has returned to pre-pandemic levels. Strong pricing power underpins Moody's view.
A TREND CHANGE IN CREDIT STRESS?
Although it isn't a big change from a very low level, the number of personal bankruptcies rose in October, possible breaking the downward trend that has been in place since 2006. The 72 cases in October is the highest since March 2021. So far, there hasn't been an equivalent rise in No Asset Procedures. Company liquidations that go through the MBIE process have been rising since May 2022 and are now at their highest since 2014.
LABOUR MARKET COOLS, SHAKING CONFIDENCE
In Australia, the Westpac-Melbourne Institute leading indicators suggest the Aussie economy is stuck in a ‘low growth rut’ and will be for well into next year. Despite some improvements, they see a range of headwinds. Components show a cooling labour market, unsettled financial markets and shaky confidence, which are now the main weak spots.
GAME CHANGER?
In Sweden Northvolt, backed by Volkswagen, BlackRock and Goldman Sachs, has developed a sodium-ion battery that has no lithium, cobalt or nickel. If confirmed, those "critical metals" could be in for a sudden price shock.
SWAPS UNCHANGED AGAIN
Wholesale swap rates have probably changed little today. The real reaction will come at the close. Our chart will record the final positions. The 90 day bank bill rate is unchanged at 5.63% and now just +13 bps above the OCR. The Australian 10 year bond yield is unchanged from yesterday to 4.45%. The China 10 year bond rate is unchanged at 2.68%. And the NZ Government 10 year bond rate is down -2 bps at 4.99%, and the earlier RBNZ fixing was at 4.93% which was down -1 bp today. The UST 10 year yield is now at 4.41% and down -1 bp from this this time yesterday. The UST 2yr is now at 4.88% so that key curve inversion is little-changed at -48 bps.
EQUITIES STILL MEANDERING IN TIGHT RANGES
The NZX50 is down -0.2% in late trade. The ASX200 is up +0.1% in afternoon trade. Tokyo has opened its Wednesday trade up +0.6%. Hong Kong is down -0.1% at its open. Shanghai is down -0.2%. Singapore is up +0.1% at its opening. Wall Street closed its Tuesday trade down -0.2%. Lackluster trading is undoubtedly due to the US's Thanksgiving week slowdown.
GOLD RISES
In early Asian trade, gold is now at US$1995/oz and up +US$6 from this time yesterday. Earlier it closed in New York at US$1998/oz. Earlier still it closed in London at US$2007/oz.
NZD ON HOLD
The Kiwi dollar is unchanged from this time yesterday, still at 60.5 USc. Against the Aussie we at 92.3 AUc and marginally firmer. Against the euro we are also up marginally at 55.4 euro cents. That means the TWI-5 is also up +10 bps at 69.7.
BITCOIN TURNS DOWN
The bitcoin price has moved sharply lower today, now at US$36,060 and down -4.1% from where we were this time yesterday. Volatility over the past 24 hours has been moderate at just over +/- 2.8%.
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102 Comments
An article for those who still whistle tunes from an outdated song sheet.
The shock that rippled through global housing markets as central banks rapidly raised interest rates last year has given way to a cold new reality: The real estate bonanza that fueled wealth for millions of people is over. That’s straining the path to wealth in countries such as New Zealand, Australia and Canada, where many people turned into amateur property investors.
I posted this news article y'day from Aussie that suggests a h'hold needs $300,000 per year to comfortably afford to buy their own home.
It's starting to look ludicrous across the Anglosphere.
And even the spruikers are turning:
"Building houses or apartments that are $700000 plus doesn't work, we need to be doing everything we can to build under $500000."
https://www.9news.com.au/national/new-research-highlights-australias-ho…
I have an interest in house, not mansion >200m2 design and your one bedroom intrigues me. Area m2? Is it a kin to those 20m2> or 40m2 Asian cupboards that were built in Akl. Seem to remember Bill English was quite happy with the size but Akl City Council clamped down on that size and set a minimum of either 40m2 or 60m2. HM you seem to be familiar with this.
Oh yeah, he's still doing his thing https://www.oneroof.co.nz/news/tony-alexander-migration-surge-increases…
Ann Gibson at the herald certainly doesn’t demonstrate much in the way of balanced and objective journalism, and she’s the top dog in the property space at granny herald.As I have said before, someone could have fun taking them to the Media Council. I can’t be bothered
Across a painted desert lies a train of vagabonds
All that's left of what we were, it's what we have become
Once our empires glorious but now the empire's gone
The dead gave us the time to live and now our time is done
Now we are victorious, we've become our slaves
A land of hope and glory, building graveyards for the brave
Have you seen the writing on the wall?
Have you seen that writing?
Can you see the riders on the storm?
Can you see them riding?
Can you see them riding?
Holding on to fury, is that all we ever know?
Ignorance our judge and jury all we've got to show
From Hollywood to Babylon, holy war to kingdom come
On a trail of dust and ashes, when the burning sky is done
A tide of change is coming and that is what you fear
The earthquake is a coming, but you don't want to hear
You're just too blind to see
Have you seen the writing on the wall?
Have you seen that writing?
Can you see the riders on the storm?
Can you see them riding?
Can you see them riding, riding next to you?
A NEW NZ STABLECOIN
Firstly a disclaimer, I know very little about crypto and "coins". I often hear for example that Bitcoin's value is because it is finite, you can't make any more Bitcoin. Why is that? If it was created before, why can't it be created again in the future? Also can't there be endless production of new coins ad infinitum lowering the value of existing coins? Happy to be educated.
Correct, a particular currency may be limited but crypto itself isn’t.
That depends on the monetary policy of the respective crypto. In the case of ratty, the mon pol is pre-programmed and we know that the supply doesn't extend beyond BTC21 million. The code ensures that.
But in reality, I am seeing estimates of BTC4-6 million have been 'lost'. So that effectively means that the total supply may only be 15-17 million. It gets even wilder because we know that approx 70% of coins have not moved in the past 12 months. In other words, not really for sale. So if you think in terms of "multiplier effects", the market price can be explosive. I remember thinking how the idea of USD500K+ per BTC to be nuts and the people talking about it as madder than a cut snake. I'm not so sure anymore.
So, what you're saying JC, is that the value of Bitcoin is "secured" by monetary policy that's been "pre-programmed". Why can't that policy or the code change ??? This doesn't seem a very strong Anchor of value.
The policy can't be changed because it's written in the code. Once you change the code, it's no longer BTC. That is why Bitcoin Cash was created, through what is known as a 'hard fork.' But BTC and BTC Cash are not the same thing.
That is all forms of money. They only have value because people collectively agree to exchange goods and services for it. The problem is, with fiat currency those that control the money printer can just create more of it without having to do anything, devaluing everyone else's savings.
With bitcoin if I own 1 Bitcoin, I own 1/21 millionth of the entire supply and no one can change my portion of the networks purchasing power.
That vis why gold was hard money, there is a large stock (about 180,000 tonnes) and only a few thousand tonnes are found each year. Therefore the inflation rate is naturally limited to 2-3%pa.
Bitcoin is limited by an algorithm that is enforced by a distributed network that needs a majority to change. And there is no way I would vote to change the hard cap.
You can divide Bitcoins into smaller units. There are already Satoshis (BTC dividied by 100m) = 2.1 quadrillion units of "currency". It's not the same as limitless supply as there's still 21 million Bitcoins and it's not dilution of supply. If anything it can inflate the value of Bitcoin. If you have 21 million bitcoins, then a maximum of 21 million people can own one. But with Satoshis it's possible (but unlikely) for every person on the planet to own 260k of them.
If someone insisted on buying a bottle of coke using Bitcoin, the lowest they could go is 1 Bitcoin. Therefore 1 BTC = 1 Coke. With Sats, it's 0.00003 BTC = 1 Coke. So 1 BTC = 33,000 cokes.
There are winners and losers. If you're an early holder of Bitcoin, then dividing down and spreading accessibility can only be a good thing for the value of your holdings. But dividing down does not dilute the total amount of the currency.
Just like cutting a pizza into 24 slices instead of 8 slices doesn't result in more pizza. But if I own half the pizza and I sell at $5 per slice?
Yes it is possible for it to change, but you need 95% + of the people who run a node to vote for it. And we are all incentivised not to through game theory and just basic economic logic.
And they are all soft forks, meaning it is backwards compatible. Like I said on my other comment Bitcoin is what we collectively agree it is like any money. Bitcoin cash was a hard fork where they changed the rules and the market decided it is not bitcoin. So we can fork it all you want but if the market doesn't agree with it the money will stay in Bitcoin.
Don't know if that was a very good description but to be honest I have given up trying to educate people on this site about it. Go back and find my comments from 2021-22 when I would provide reference material for everything if you actually want to learn.
So why not have NZD? Because you think the stable coin is more secure than the banks? Or because you think it is a more useful currency?
Its primary use case is that it can be transferred anywhere in the world without the need for an intermediary like a bank. Another feature is that the owner can have exposure to NZD outside the banking system.
So it's primary use cases are to
-Support likely nefarious activity
-Help doomsday preppers who are too simple to understand that in a banking crisis, the currency turns to custard, so those 'outside the system' tokens are massively devalued.
Not all innovation is good innovation.
Nobody can fully understand crypto by "spending 15 minutes researching it". I have spent a few hours over time and I still cannot fully grasp it to a level where I can say that I'm confident I know what I'm talking about. I'm not convinced at all you know more than me on the subject Baywatch. Why not be open to learning rather than being sarcastic or cynical ?
If you have 2 hours of free time and a fresh mind, then there is Dan Olson's documentary The Line Goes Up.
https://www.youtube.com/watch?v=YQ_xWvX1n9g
It is well made and thorough, but might be too much in one go. You will learn a lot though.
And the other side...click here than Yvil,..which I have posted before
https://www.lynalden.com/broken-money/
Also here's one on reading weather maps
https://about.metservice.com/our-company/learning-centre/how-to-read-we…
Your welcome!
EDIT - I know Yvil will not click on either link...
Stick to your motel business I think...
https://www.amazon.com/Broken-Money-Financial-System-Failing/dp/B0CG898…
If you have 2 hours of free time and a fresh mind, then there is Dan Olson's documentary The Line Goes Up.
It's dreadful and surface level, even though some of what he says resonates with me. However someone who believes that NFTs are little more than digital pixels doesn't really understand the space and potential of what NFTs can become. For ex, an NFT can be ownership of many different assets, including stocks, public assets, and businesses. This is what Blackrock has been talking about.
Olson dedicates about 5 mins to talking about Bitcoin.
Probably nothing
The share of US home sellers dropping prices is at a record high. Nearly 7% of for-sale homes in the U.S. posted a price drop during the four weeks ending Oct. 29, which is the highest portion since Redfin started tracking this data in 2012.
https://fortune.com/2023/11/06/housing-market-record-number-sellers-cut…
Once the masses and the bag holders realise property is overvalued, they only thing that will put a floor in is lower rates, the RBNZ knows this and once its fallen will drop rates..... the question is how far does it fall before those rate cuts impact bids, most are donkey deep in RE already, some... not so much...
Once the masses and the bag holders realise property is overvalued, they only thing that will put a floor in is lower rates, the RBNZ knows this and once its fallen will drop rates
Solid assumption. But they cannot state that "the pty mkt is cooked, therefore we have to save it by dropping the cash rate".
It has to be something else. Like recessionary economic conditions. But they know that the bubble is the precursor for the wealth effect, which drives incremental consumption. So in some ways, their actions are about preserving the bubble as much as possible.
Look said the boy, the emperor has no clothes..... there is no new sin. I have always thought the bottom is 35-40% from peak and as TTP says, we are still above pre covid....... do not look down.
Any market must go through a solid accumulation phase before an old peak can be challenged, no one is buying here from a few pillars (investors, bachs etc), THE BASE IS WEAK AND WILL NOT HOLD
PASS THE GREEN SHOOTS TO THE LEFT HAND SIDE.
Watching pennies
One of the most extreme cases is playing out in New Zealand, which was home to one of the world’s biggest pandemic booms, with property prices rising almost 30 per cent in 2021 alone. About 25 per cent of the current stock of mortgage lending was taken out that year, and a fifth of those were first-time buyers, according to the Reserve Bank of New Zealand.
Mortgage rates in the country are typically fixed for less than three years – meaning the central bank’s 525 basis points of rate increases since October 2021 are sending house payments soaring.
The RBNZ says around half of the outstanding stock of mortgages have been refinanced this year. It estimates the share of borrowers’ disposable income dedicated to interest costs will rise from a low of 9 per cent in 2021 to about 20 per cent by the middle of 2024.
That’s squeezing the budgets of people such as Aaron Rubin, who took out a $NZ1 million ($920,000) mortgage in 2021 to finance the purchase of a $NZ1.2 million four-bedroom house.
After moving to New Zealand from the US eight years ago, he and his wife, Jessica, thought buying a home in the coastal city of Nelson was a decision that would provide stability for their two young children. At first, the couple paid about $NZ4000 a month on their mortgage. After a refinancing, it’s now up to about $NZ6400.
“We can no longer afford to visit our family in the US, and we are literally watching every penny that flows in and out of the account,” says Aaron, a 46-year-old software engineer. “It’s time-consuming and stressful, and it’s changed our lifestyle.”
He considers himself lucky – his financial situation isn’t dire, and the couple can afford to continue paying their mortgage. He sees many Kiwis under far greater pressure.
The saving grace for many households has been strong wage and employment growth that has kept distress to a minimum, says Sharon Zollner, chief New Zealand economist at ANZ in Auckland.
“Once you deflate it by household income growth, debt is actually considerably lower than it was in 2007,” she says. “But, of course, the average hides a million stories, and there are certainly some stressed people out there.”
Investor pullback
The global housing boom of the last decade made real estate a fast path to wealth in countries such as New Zealand, Australia and, especially, Canada, where tens of thousands of people turned into amateur investors. By 2020, people with multiple homes had come to account for almost a third of the housing stock in two of Canada’s three most populous provinces, Ontario and British Columbia.
But higher interest rates and bond yields mean the math has suddenly flipped. Owning an apartment in Canada’s biggest city, Toronto, will now yield only 3.9 per cent after mortgage costs and other expenses, less than the 5 per cent earned by investing in a Canadian government treasury bill, according to a Bank of Montreal study.
“I don’t see how you can replicate the last 20 years going forward,” says Robert Kavcic, the Bank of Montreal economist who authored the report. “You’re going to have a whole generation of investors learn a pretty hard lesson.”
Higher borrowing costs have already pushed some investment properties deep into negative cash flow, forcing their owners to sell while also damping interest in new purchases. That could spell trouble for regular people just looking for a place to live, too.
Investors buying units pre-construction has become a key source of financing for developers in the last decade, and their pullback has already seen the delay or cancellation of thousands of planned units in cities such as Toronto. Canada’s already under-supplied market is one reason home prices have proved surprisingly resilient to higher interest rates, and the expected slowdown in building could only exacerbate the shortage.
A similar situation is playing out in Europe, where higher rates and soaring construction costs threaten to intensify supply strains. In Germany, new building permits fell more than 27 per cent in the first half of the year, and in France they dropped 28 per cent through July.
Sweden, suffering its worst slump since a crisis in the 1990s, has building rates running at less than a third what’s deemed necessary to keep up with demand, threatening to further test the limits of affordability.
And that’s not even getting into the compounding strain from skyrocketing consumer prices generally. In the UK, which is facing the highest cost-of-living increase in a generation, nearly two million people have resorted to using buy now, pay later credit to cover groceries, bills and other essentials, according to a survey this year by the Money and Pensions Service.
With more than 1 million home owners estimated to be refinancing their mortgages this year at much higher levels, that pressure will only get worse.
With such a lack of building and huge immigration, will this not slingshot the next upswing to be steep due to the sheer demand cranking rents so high they re-attract investors? Or the the option: Will rents become so unafordable that the market will correct them downwards from too many not being able to afford a roof over their heads?
Chemically, sodium can't pack the grunt, last time I read about it, anyway. Good for static use, dies faster cycling-wise, too.
Not knocking it, by any means - but it won't be driving the price of lithium; there is more all-in demand for batteries than can be assuaged. If we are to even get to the 2050 not-much-fossil target (let alone the cessation we need by 2030) the plane would need 4 nuclear plants built PER DAY:
https://www.forbes.com/sites/rogerpielke/2019/09/30/net-zero-carbon-dio…
They'll all be in demand, unless....
Kinda fitting that the comments thread today is houses and crypto - both speculative assets! At least you can live in a house - or rent it out to the poors.
My crude view is that house prices are simply a function of how much people can afford to pay, which is a function of (i) credit costs, (ii) availability of credit, and (iii) household income of buyers. Indeed, if you look at mortgage payments as a % of household income the data is very steady overtime at between 36% and 39% - only spiking when rates are hiked and people are forced to spend more than they wanted to (GFC, 2022, 2023 etc). What this means of course is that house prices go up when borrowing costs come down, and up when borrowing costs go down. Of course they do.
Now, very serious people will tell you that we just need to free the mighty market up - strip the regulations away and we will have a surplus of houses and then the prices will come down. Bless their cotton socks. Why would developers build houses if there was a surplus?!? And, even if they did, where do people aspire to live - everywhere? Nope. Housing markets and prices are localised - houses can be 25% more expensive on one side of the street because the catchment area for a good school has a border down the middle of the road.
Thing is where does it end Jfoe, there are millions who would love to live in a tin shack anywhere in NZ. Meantime we are struggling to house the people here now.
I know what you are saying about developers, I guess that is why there needs to be.................something. Any ideas? Anyone?
Maybe the 3 wise parties will lead us to a ......................... something.
Over in Aussie, property interest payable on dwellings increased from $45 billion to $91 billion in the 2023 financial year, more than doubling in recording an increase of +102 per cent.
Wowzer.
https://petewargent.blogspot.com/2023/11/property-interest-bill-doubles…
Over in New Zealand, property interest paid on dwellings increased from NZ$9.6 bln in the 2021 year to $10.9 bln in the 2022 year and to $16.2 bln in the 2023 year to September. That is a +49% increase from 2022 to 2023 (after a +13% increase in 2022).
But it is only a +36% increase from five years ago, even though the loan amounts rose by +30% over the same period. Not so tough on this side of the ditch.
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