A review of things you need to know before you sign off on Monday; more jobs in more regions but fewer for the young, new house lending lower, less FX intervention capacity, swaps firmish, NZX up, NZD stable, & more

AI agents could soon cause massive problems for the banks. Let me explain.

Muse and similar agentic AI assistants have the capability to sweep h'hold cash automatically into accounts paying 3.3% to 5.0%, instead of the 0.1% national average on checking accounts.

If every household used AI agents to optimize the return on their cash balances, banks could lose a large share of the cheap deposits they rely on to make loans, which would be a problem for the entire financial system.

OK, you might say that banks don't need deposits to make loans. That's true. But this will spook the banks. Many fintech companies already offer higher yields on deposits than the banking sector. 

There is a financial stability risk associated with normies figuring out that they're being ripped off. The reality is that financial stability is entirely dependent on most people being ignorant. 

While we question the property rights of supermarkets, the UK goes full Marxist. 

Councils will be given more powers to seize empty homes and bring them into use | The Independent

Fisher Funds annual reports out and it doesn't look good. Managed funds results are not great and Barramundi had its worst performance by Fisher in 20 years. Punting on SaaS, IT, and digital advertising has not worked for them [SEEK, Xero, WiseTech Global, Tyler Tech, TenCent, have hit them hard].

https://fisherfunds.co.nz/forms-and-documents?documentType=Annual+Repor…

The Blue Cross/Blue Shield Association says that AI is already driving *up* healthcare costs, as hospitals use the technology to find instances where they can bill more for the same level of care.

More than 60% of hospital systems are now using AI-enabled technologies that can scan lab results and electronic records to identify secondary diagnoses, which could move a patient into a higher-severity, higher-reimbursement billing category. For the analysis, researchers looked at secondary diagnoses like anemia following major bowel surgery.

https://www.bcbs.com/about-us/association-news/bcbsa-analysis-ai-coding…

Iran not in a great negotiating position.

Last week, crude exports through the Strait of Hormuz (for all countries except Iran) were about 85% of pre-crisis levels. (Kpler data)

https://x.com/anasalhajji/status/2104412415463231691

These polls are all over the place: https://www.stuff.co.nz/politics/361036026/nz-election-2026-live-updates-politics-campaign-news

Probably the most consistent outcome is opportunity look likely to make 5% and be king maker. 

Gold and Silver on a downslide, currently at $4,170 and $61.50.

COMMENT: There is an attempt – a very nascent one - from a very rich right-wing man to fundamentally skew the New Zealand election.

Harry Mowbray, father of the toy company siblings who have donated $450,000 to coalition parties this year, has been calling around looking to get a campaign going that exploits the “overhang” in MMP to get the current parties of the coalition an advantage.

An “overhang” happens when a party wins more electorate seats than its share of the party vote should entitle it to. This then grows the size of Parliament and skews its proportionality – it means that the shape of the Parliament does not match the shape of the overall party vote.

(your) Tax

https://www.youtube.com/watch?v=4AyhV70BDwE

Say what?  Seems impossible.

"Jobs for those younger than 35 actually fell -1.7%. Those for those 65 and older were up +3.8% and the fastest of any other age cohort."

Might as well make some good out of a bad trend - no super to anyone over 65 who is still working and earning more than 60% of the average wage (which is the metric/floor on which super is based).  A kind of means-test but not an asset test.  We really need today's youth to have the same gameful employment opportunities as the 65+ year cohort did when they were young.  

Morning Report... "And the UST 10yr yield is now at 5.21% and up another +4 bps from this morning, its highest in 24 years."

My personal precursor to a state of "steady as she blows" is watching the Western-centric sovereign bond markets, and in particular that of the USA (United Sanctions of America) Treasuries and especially the 10 year T, because that is what sets the tone for most borrowing and impacts directly on mortgage rates. I believe that a meltdown is only weeks/months away.

Traditionally 5.0-5.25% was regarded as “elevated stress level”, 5.25-5.5% “serous danger”, and 5.5-6% as “something is breaking territory”.

Reuters canvassed investors only a few days ago on exactly this question. The conclusion was essentially... 5% used to frighten everyone, now people are beginning to ask whether 6% is the real breaking point.

JPMorgan reported that major investors were discussing a 5.5–6.0% 10Y range as a potential “breaking threshold” for equity markets.

My gut feeling is it is more like 5.5% as debt rushes to the short end of the yield curve, and short duration T-bills become an even bigger story than the 10-year-T.  

WHERE MY WORK DIFFERS FROM MOST RESEARCHERS – and where for me the denominator becomes the real story

Headline global GDP includes enormous amounts of activity that may contribute little or nothing to the productive surplus from which debt ultimately has to be serviced. If you substitute a productive-GDP/PGDP denominator, the apparent debt burden rises sharply.

If global GDP is roughly $120 trillion, and broad global debt roughly $365 trillion, conventional debt/GDP is about $365T ÷ $120T ≈ 304%.

But suppose, purely illustratively, because we don’t have a robust internationally standardized PGDP dataset - genuinely productive output were only 50%, 40%, or 30% of headline GDP. 

That is precisely why the PGDP argument is so vital - at 40% productive GDP, for example, the world’s $365 trillion debt mountain isn’t three times the productive-output denominator. It is 7.6 times that mountain.

The relevant question becomes - how much genuinely productive economic activity exists underneath the mountain of financial claims from which the escalating interest burden can ultimately be serviced?

That question is largely obscured by conventional debt/GDP ratios because GDP counts enormous amounts of financial intermediation, government expenditure, property-related activity, healthcare expenditure and other services regardless of whether they expand the productive capacity from which the accumulated debt claims can ultimately be honoured.