A review of things you need to know before you sign off on Friday; SBS makes rate surprise, employment weak, mortgage stampede for short rates, swaps stable, NZD soft, & more

I'm shocked its not more.

My property (mortgagee free) has rent of $40,000 per year, if that.

I paid my insurance this week.  The insurance alone is a whopping $2,900.  To compare that, my main home insurance is $2,300 despite the price being double that of the rental.   Total overhead costs could easily be $8,000 a year.   The agent takes 7%.  Then add in capital costs, a new heat pump etc and its hard to see the point without another Jacinda Ardern style money pumping 40% in a year return.

Sadly. It won't stop the wannabe residential property 'investors'. The last 20 years has created a foolish mindset among far too many, who know far too little.

"Capital gains are nice but for most people I speak to it's more about reducing the debt over time."

I call BS here after more then 3mil cap gains over a long time .....     ITS ALL ABOUT the capital gain, who wants a property after 30 years worth what you purchased it for but mortgage free????

its seems to me that only the Spruikers on here are in this for social justice and subsidising their tennents

Great news. The sooner these parasites are run out of “business” the better.

"ANZ economist Henry Russell said - being able to claim losses against rental income meant investors were likely to pay more for properties."

And there we had it. A recipe for inequality.

Perhaps due to Bitcoin being more volatile?

I like it how "Tokyo is up 0.2%"  and yet... "Bitcoin is up a mere 0.2%"

It makes sense to me. a 24-hour variation of 0.2% in ratty is mild. 

You won't read about in Granny, but the SEC appealing the case against Ripple was interesting to me. And why is it interesting? Because the case reflects the war between the establishment and change. The SEC want to show who wears the trousers but most people in the crypto space are just yawning at their posturing now. 

But XRP only dropped 10-12% on the news. Compare that to 2020 when the price got smashed on the announcement of the initial court case  Incidentally, if you compare the price of XRP today with the price on the same date of the last cycle, XRP is up 100%, despite being one of the most despised cryptos. Compared to cash, most stock indexes, and even the mighty gold, that's a fairly decent return. 

I'm bullish on XRP now, even though I don't believe it has real value. Don't be surprised if we see a 7-10x in the next cycle. Even seen blow-off top predictions of USD10-30.    

The vitriol on Chinese EV subsidies this morning was great too. Like, mate, that's how every rich country got rich - they protected their trade (or plundered and conquered). Look at South Korea - literally trillions of US dollars in subsidies in today's money. 

Yes it is.  Its still operating back in a time where the economy was booming, people were flush with money, and everyone was happy.  Ah to remember the golden years of the "rockstar economy".  I'm off there for the third time this year - my mood lifts as soon as I step off the plane. 

They don’t do daylight saving cos it fades the curtains….at least 3 hours I’d say….

Harris is buying an election?

They are running the budget deficit at around 7% of GDP. I mean, it's incredibly reckless - but completely unsurprising when you have morons like Biden and Harris in charge outsourcing the running of the country to the millitary industrial complex. She can hardly string a sentence together let alone understand what internal balance is.

The unsustainable nature of global debt, estimated to be around $400 trillion. Much of this debt is a "fiat contract" that is programmed to debase over time, meaning it will lose value due to inflation and poor management by governments. The U.S. alone has significant unfunded liabilities, amounting to approximately $170 trillion, which will never be fully repaid due to mathematical impossibilities in raising sufficient funds.

Fed and US Govt working in tandem - pumping $ into the ecomomy through tax breaks, interest payments on reserves, subsidies, defence spending etc. Last time I looked US deficit spending was running at over 6% of GDP all in. That's pretty similar to NZ during the C*vid period.

Now, with a current account deficit of around 2% of GDP and allowing for some onshore savings, the US are generating a domestic surplus of about (taps calculator) $1.5 trillion. Voila.. There's your GDP.

They will carry on doing this, because they can. Although as interest rates fall some of that stimulus might drop out automatically (eg interest paid).    

Take care. The Sahm Rule isn't going to be foolproof when everyone in power (thinks they) understands it.

Instead, they'll create a whole new problem. [evil grin]

hence movement to gold....

If you’re referring to me, I’m as confused as anyone else about what is unfolding. But US 10 year has come down a small amount but not much. 

 

I think central banks are walking a right rope between causing a severe deflationary recession if they keep rates where they are, while simultaneously risking inflation surging again if they drop too quickly (and some external shock drives oil higher again). 

 

On this line of reasoning - I think that each time we see this extreme intervention in markets (post GFC and 2020) I think it is going to get harder and harder for central banks to hold the narrative that they have everything under control. I think more people are seeing through the myths they are trying to tell the public. People are betting/gambling with more and more leverage as to which rate rates are going - and the mistakes like they made with overstimulation post COVID and then mis-calling the inflation issue as ‘transient’ are going to get worse down track as each mistake amplifies the impact of the subsequent require market intervention. 

 

eg this recession could really get going the next 12 months and they drop rates big time again then boom we have inflation at 10+ % a year later and we see wild swings in market sentiment - eventually this becomes completely uncontrollable. 

 

If I was the RBNZ I just wouldn’t drop rates that much and say to Nicola Willis it’s your turn to save the economy via fiscal policy so that we can have a more steady handed approach from a monetary perspective. 

A lot of this has to do with flow. There’s a lot of hedge funds who want to go long (invest in ) NZ interest rates and they do it through the derivative market. Usually in NZ we have a good constant flow of 2 year borrowing via mortgage fixing but as this article states we have had a massive shift into shorter borrowing. Hence the supply of borrowing has diminished and the demand for investing is still increasing. Then it’s just Eco101 S/D curve 

Might as well be hanged for a sheep as a lamb.

‘US Government debt is bigger than the ENTIRE US economy'

So private lenders have discovered how to force their taxes on an economy?

Time for the governments to default? Probably. [evil grin]

‘US Government debt is bigger than the ENTIRE US economy

Global debt to global economic output is estimated to be somewhere between 3-4x. 

I think that is a junk analogy. It is an activity-to-liabilities ratio. If it was valid, most companies would be getting your disapproval. Let's take a local one as an example. AIAL. It has a monopolist flavour like a government. It has annual revenues (GDP?) of $900 mln, and liabilities (debt) of $3.5 bln. It is considered a good business. On an comparative basis, the US Federal Government is in far better shape. But actually, it also shows this is a very superficial, junk analogy. If analysts don't track this ratio for commercial enterprises, why track it for governments? Yes, I know, you can score political points with it in the public arena. Of course you will see it debated on X/Twitter. But is is still junk. There are far better ratios to use.

Yup.

Monopolies can do whatever they think they can get away with. 

Try 25% here in Wellington!

My local council has chosen to pay $36,000 a year to maintain some planter boxes in the middle of a CBD street, which has now been pedestrianised and turned into a 10 kmph zone.  Because it would cost $230,000 to remove them.  When you elect incompetent and inexperienced people to Council you get stupid outcomes like this.  

You realise it is an informal decimalisation for the average person?

They don’t work for me. Always pinch on a bone on a certain part of my foot!

many swear by them though 

Iceland has rates at 9%. Housing market still running hot.

Iceland’s central bank unexpectedly cut rates by 25 basis points, abruptly easing Western Europe’s most aggressive constriction as inflation starts to give in.

Policymakers at Sedlabanki reduced the 7-day term deposit rate to 9.0% on Wednesday after keeping it at 9.25% since August last year. The north Atlantic nation’s largest banks, Islandsbanki hf and Landsbankinn hf, had projected unchanged rates.

https://www.bloomberg.com/news/articles/2024-10-02/iceland-surprises-wi…