Here's our summary of key economic events overnight that affect New Zealand, with news American data is weaker today, and China is on a sharp turn inward.
But first we should note bitcoin's sharp rise in price. However the surge seems to have run out of steam as you read this. But it is enough to note that prices are back to November 2021 high levels.
In the US, durable goods orders slumped in January, primarily driven by sharply lower aircraft orders. That makes them -0.8% lower than the same month a year ago. A pattern of surges and slumps interspersed by 'no-change' months, has developed over the past year. However, non-defense capital goods orders actually rose slightly in January from December but these too were lower year-on-year.
American retail sales at physical stores (on a same-store basis) were up +2.7% last week from the same week a year ago, not really enough to account for inflation.
Consumer sentiment as measured in the Conference Board survey retreated in February, although they noted it is essentially range-bound. It is in a range that is lower than before the pandemic, but at about the same level as pre-GFC.
The US Richmond Fed factory survey reported a sluggish situation in February although expectations for better order levels rose sharply. But the service sector in the same district took a sharpish dip.
However the Dallas Fed services survey for February reported a notable improvement.
The latest US Treasury bond auction for their 7 year Note again brought very good solid support, but the median yield rose from 4.05% a month ago to 4.27% today.
Across the Pacific, Japanese consumer price inflation was expected to slow in January, and that is what happened, falling to 2.2% from 2.6% in December. But core inflation fell slightly less to 2.0% from 2.3%, and that is down from over 3% a year ago. They will be nervous that their long-run deflation tendency is not yet beaten.
Taiwanese export orders recovered from their December dip to be +1.9% higher in January than the same month a year ago.
China has widened its national security laws to include anything Beijing claims is a 'secret', including company information within a foreign owned company. There are harsh penalties for finding out you have shared such information with company bosses who reside outside the country. Obviously the law is wider than just this, but that is one important aspect and it will cast an even darker pall over foreign investment plans. And through the new 'national security' laws in Hong Kong, which extend Beijing laws into the City, businesses there will be concerned too.
The overnight GDP Pulse auctions delivered lower prices for both WMP (down -4.2% from the last full GDT auction and down -3.4% from the prior Pulse event), and SMP (-2.6% and -2.0% respectively). These lower results will have surprised the derivatives market.
The UST 10yr yield starts today at 4.29% and little-changed from this time yesterday. The key 2-10 yield curve inversion is less at -40 bps. And their 1-5 curve inversion is slightly less at -72 bps. And their 3 mth-10yr curve inversion also less at -111 bps. The Australian 10 year bond yield is now at 4.18% and up +3 bps. The China 10 year bond rate is now 2.39% and a new all-time low. The NZ Government 10 year bond rate is little-changed at 4.91%.
Wall Street has started its Tuesday session virtually unchanged on the S&P500. Overnight, European markets were mixed; London unchanged, Frankfurt up +0.8% and the others in between. Yesterday Tokyo ended its Tuesday session unchanged but Hong Kong rose +0.9% and Shanghai was up +1.3%, both with late afternoon rallies. Singapore ended down -0.4%. Meanwhile the ASX200 rose marginally, up +0.1% and the NZX50 ended its Tuesday trade down -0.1%.
The price of gold will start today up +US$6/oz from yesterday at US$2033/oz.
Oil prices are up +US$1 at just over US$78/bbl in the US while the international Brent price is now just over US$82/bbl.
The Kiwi dollar starts today at 61.7 USc and unchanged from this time yesterday. Against the Aussie we are at 94.3 AUc. Against the euro we are still at 56.9 euro cents. That all means our TWI-5 starts today at just under 71.1 and little-changed.
The bitcoin price starts today at US$57,114 and up a spectacular +7.1% from this time yesterday. It is now back to where it was more than two years ago. Volatility over the past 24 hours has been high at +/- 3.9%.
Join us at 2pm this afternoon for full coverage of the RBNZ's February Monetary Policy Statement and OCR review. Financial markets don't expect any rate change, but of more interest is hearing how the RBNZ views the medium term inflation risks.
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59 Comments
A far better book that fits our times - Lyn Alden
Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better
https://www.amazon.com/Broken-Money-Financial-System-Failing/dp/B0CG83Q…
Maybe Christchurch City Council can switch to growing tulips on their great tract of land in Tarras, Central Otago now that the reality has dawned that the airport pie in the sky was never going to fly. Interesting now to witness how they will explain to their ratepayers facing about a 13.5% hike in rates why and what this daft venture has contributed to that.
https://www.zerohedge.com/markets/nuts-entire-market-chasing-one-stock
No. The markets likely will not crash tomorrow or in the next few months. However, sentiment has reached the “this is nuts” stage. For us, as portfolio managers, such has always been an excellent time to start laying the groundwork to protect our gains.
Thats right... timing the market beats time in the market, who could have thunk.
Buy at the high, hold for 2 years, then sell for a loss right as the next bull market is starting?
2 months before the halving, right as NINE ETFs are approved together and exceed any previous launch in history, much of the regular financial world is piling in, and Blackrock takes over 1.3 billion dollars of inflows on the same day? You are joking right?
Lol, no. I'm only talking about $110. I bought at the high because it was apparently going to the moon (it didn't) and I figured might as well have some BTC just in case it increases by 10000%. Now I want my $97 back (less exchange withdrawal fees).
I was thinking about buying some when it was NZD$800 a token, so I have form in this area.
I wonder if it is a result of our society moving to almost fully online based work, communication, and so on. Stock prices are largely driven by information, and the way information is distributed has changed hugely with the internet. The tendency appears to be that things become more popular, more quickly than ever before. For example, when I read in my daily newsletter from Wall St Oasis or Litquidity that Meta is "absolutely ripping" I can open Robinhood and buy some on the NASDAQ within 2 minutes. I doubt that as a society we have ever had widely available access to such a direct link between information and the ability to act on it.
One day I'm hoping to find a book or thesis that discusses this better than I ever can.
...the iron law of investing is that a security (asset) is nothing but a claim on a future stream of cash flows. Valuation is a crucial determinant of long-term returns. The higher the price an investor pays for those cash flows today, the lower the long-term rate of return earned on the investment..
The corollary is also true. The lower the long-term rate of return demanded by investors, the higher the price moves today. So clearly, changes in investors' attitudes toward risk will strongly affect short-term returns. If investors become more willing to take market risk, it is equivalent to saying that they are demanding a smaller risk premium on assets (that is, a lower long-term rate of return). Prices rise as a result. Now, the fact that residential property prices are higher also implies that future long-term returns will be lower, but that's part of the deal. https://www.hussmanfunds.com/
When one nets out all the assets and liabilities in the economy, the only thing left – the true basis of a society’s net worth – is the stock of real investment that it has accumulated as a result of prior saving, and its unused endowment of resources. Everything else cancels out because every security represents an asset of the holder and a liability of the issuer. Conceptualizing ‘saved or unconsumed resources’ as broadly as possible, the wealth of a nation consists of its stock of real private investment (e.g. housing, capital goods factories), real public investment (e.g. infrastructure), intangible intellectual capital (e.g. education, inventions, organizational knowledge and systems), and its endowment of basic resources such as land, energy, and water. In an open economy, one would include the net claims on foreigners (negative, in the U.S. case). Understand that securities are not economic wealth. They are a claim of one party in the economy – by virtue of past saving – on the future output produced by others.
– John P. Hussman, Ph.D. (2015) Link
Breakfast briefing: Pullbacks everywhere
Deindustrialization in one chart: Price for CO2 emission rights (Carbon Futures) hit lowest since Jul 21. Link
OUCH! #ECB money supply shrank in January as private sector moved its money back out of deposits into less liquid assets while net lending to households rose only slightly & lending to comps declined. Shrinkage of M1 has accelerated to -8.6% YoY, Rise of M3 halved to 0.1% YoY. Link
China has widened its national security laws to include anything Beijing claims is a 'secret', including company information within a foreign owned company.
US ambassador Burns asks: "who's going to be the most powerful in the most important strategic part of the world, the Indo-Pacific?" Common sense says the largest nation in the region, China should be, not the US, a nation located literally on the other side of the planet. Link
Here are some reasons why I will not go near rat poison:
1. **Volatility**: Ratty’s value can fluctuate widely in a short period, leading to significant financial losses.
2. **Regulatory Risks**: Regulations surrounding cryptocurrencies are evolving and uncertain, potentially impacting the value and legality of Ratty.
3. **Security Concerns**: Cryptocurrency exchanges and wallets are vulnerable to hacking, risking the loss of investment.
4. **Lack of Regulation**: The decentralized nature of Ratty means there is no centralized authority to turn to in case of fraud or disputes.
5. **Limited Adoption**: Despite growing popularity, Ratty is not universally accepted, limiting its real-world utility.
6. **Environmental Impact**: Ratty mining consumes significant energy, contributing to environmental concerns.
7. **Market Manipulation**: Due to its relatively small market size, Ratty is susceptible to price manipulation by large holders.
8. **Technological Risks**: Emerging technologies could potentially render Ratty obsolete or less attractive in the future.
9. **Lack of Intrinsic Value**: Unlike assets like gold or real estate, Ratty’s value is based solely on market demand, posing a risk of sudden devaluation.
10. **Speculative Nature**: Investing in Ratty is often driven by speculation rather than underlying fundamentals, increasing the risk of losses.
The big question: Is it a 'risky' asset, or is it a risky 'asset'?
I have bagged bitcoin from the start, but if I had money lying around I would invest in it (not now but when it hits another low). I don't see it as a long term investment due to the huge risk of demand disappearing - if it ever became stable it would almost be pointless and people would sell up. But as a greater fool investment its great if you are not the greater fool.
Its really only a statement against the everything bubble impact on shares, real estate, old cars etc. It is essentially mass price without supporting income - speculation. What do you invest in in a crooked system controlled by Central Banks and their owners?
The most important part of any speculative play is getting out while you are ahead...
Jimbo says. "....if it ever became stable it would almost be pointless....."
Yes indeed. There is a feature of gamblers where it's all about the thrill, even if they lose money overall.
Like the guy I met in Vegas, who excitedly and endlessly - endlessly - explained the systems to me. Really juiced up.
But he had not worked out why the casino gave him free flights and accommodation.
And he portrayed an air of being a knowledgeable insider. Which was similar to some here who talk of "old ratty" and "normies.".
He loved belonging to some secret club. But actually it did not exist.
Then there was Ernie. Black singlet Aussie factory worker from my student days. Who would only bet on horses with very long odds. The thrill of a big win was more important than winning overall. But I don't recall that win happening at all.
There is genuine money to be made in Bitcoin because you are not betting against the casino, you are betting that there is someone in the world greedier than you. There are plenty of people who see the price of Bitcoin going up and rush in at the top so they don't miss out, they may only do it once but the world is a big place.
Like gambling, to me BTC investment makes sense if you are very rich (and can put big amounts in) or very poor (have nothing to lose).
Unless I was using leverage, or I bought into a coin that experienced gains in the thousands of %, the profits could be nice but not exactly life changing. I've had stocks 4 or 5x in the past and tbh it didn't give me a huge buzz because I only invested a few k initially. My losses definitely had a bigger impact, even though they were much smaller
Yes I agree. I am slightly kicking myself that I didn't invest when it was $16k a year or so ago, but realistically I would have only put in a few thousand so I haven't missed out on much. We have a mortgage so investing large in Bitcoin would be some serious gambling.
I think this is the critical thing, most people wouldn't have enough "Invested" in Bitcoin to make a real difference. On the flipside I have a million bucks in property and didn't blink twice about the investment. The payback on property is daily for me, its been life changing, the price goes up it goes down but you still have the house.
"Putting a small amount into it now, isn't going to be up to much. If you had half a million bucks cash, you're probably not going to want to risk it."
People have been saying that at every single price though... "I'm too late!". Yes the rate of growth will slow down, but all that matters is that is outperforms other investments. And the design of it ensures that it will only increase your purchasing power over time. Whereas that $500k cash is designed to lose value, it's literally guaranteed to lose purchasing power.
In 2034 that $500k will be be worth only $375k in todays money if you don't do anything. That's the best case scenario based on the last 10 years.
Say you could buy a house for that and it doubles over the next ten years. Well that's worth about $750k in todays money.
Do you think in 2034, $500k of bitcoin brought today will be worth less than that? The same? Or more? That's the only thing that matters.
If we just look at the past 10yrs (so avoiding the first 5 years of expontential growth) an investment of 1$ from February 2014 to Jan 31 2024 now would be worth 50.84$, with a total return of 4983.93% (48.12% annualized).
The Inflation Adjusted Capital now would be 38.63$, with a net total return of 3762.59% (44.11% annualized).
Now I'm not guaranteeing your $500K BTC purchase is going to be worth $19 Million in todays money... but it will outperform everything else.
People are greedy and always wanting more. One of our clients is a professional crypto trader. Does very well. He says because he is mostly betting against people like that who don’t know what they are doing.
His advice for the average person was; dont trade, don’t use leverage, don’t buy shitcoins. Simply buy Bitcoin and do nothing. All assets and money will lose value against BTC over the long term.
Shock and horror at the water coolers because of the BTC price, but mention this and nobody would be startled. Because this is "normal".
The Bank of England may sell all the UK government bonds bought under quantitative easing to better prepare for a future crisis, a move that would put it at odds with the US Federal Reserve.
QE has become a political risk for the bank because losses on the portfolio are covered by the taxpayer under an indemnity agreed when the program was launched in 2009. Initially, it made £124 billion of profit – all of which the government has spent.
Since October 2022, the program has incurred £49.4 billion of losses, which has been paid by the state. Net losses could reach close to £100 billion over the lifetime of QE, the BOE has warned.
https://www.bloomberg.com/news/articles/2024-02-27/boe-may-sell-whole-q…
Banks? They look at Bitcoin and say “Let’s see. It is an open, borderless, decentralized, transparent, and peer-to-peer currency. Fantastic! can we have that without the open, decentralized, borderless, transparent, peer-to-peer, and instead add a nice dose of heavy control?”
But who will provide a live update outside the court house at 6:17pm, when it is dark and everything is shut because the verdict was decided 5 hours ago, and everyone else went home straight afterwards?
Sad to see a "news" outlet disappearing, but it was more a parade of junkies requiring screentime than journalists actually adding value to the story.
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