Here's my Top 10 links from around the Internet at 10 am. I welcome any additions in the comments below and please send any suggestions for tomorrow's Top 10 at 10 to bernard.hickey@interest.co.nz We multitask at interest.co.nz... 
1. This story from Marty Sharpe in the Dominion Post (Stuff) is a fascinating insight into how New Zealanders think about property now. The Ombudsman's office has ruled the Hawkes Bay Regional Council must reveal the location of 3,099 potentially contaminated sites. The council had initially refused to disclose the locations because disclosure might affect property prices. This is likely to have a much wider impact because Environment Minister Nick Smith says he expects other councils to follow suit.
Regional council chairman Alan Dick said the council would discuss how the information was to be made public in a closed meeting on Friday. Very few of the sites were residential properties, he said. The Real Estate Institute's Wellington region president, Euon Murrell, said notifying people of potential contamination was "dangerous ground". "It puts the suspicion in someone's mind that a site is contaminated. There should be strong evidence that a site may be contaminated before this is done." He said the huge impact on sales was exemplified by a failed sale he had in Porirua early this year. "I had a piece of land under offer and the buyers pulled out after finding out it was potentially contaminated. The fact that it was listed made them run a mile. They didn't do any checks at all, they just ran," Mr Murrell said. A similar issue caused a furore in Auckland in 2004 when Auckland City Council decided to note potential contamination on about 5000 Land Information Memorandum reports.
2. America's Federal Deposit Insurance Corp has just thrown a grenade into US bank balance sheets. It has urged them to boost reserves to account for customers' negative equity, particularly for those customers who used their homes like ATMs before the bubble burst. The FDIC sent banks a letter urging them to book losses if their loans were worth more than the equity in the home, Bloomberg reported.
Senate Banking Committee Chairman Christopher Dodd and House Financial Services Committee Chairman Barney Frank in a letter last month asked regulators to assess whether banks are carrying home-equity lines of credit, or HELOCs, and non- revolving home-equity loans at "potentially inflated values," hindering efforts to have mortgages modified to stem the soaring foreclosuresthat have roiled the U.S. economy. "It was probably triggered by the fact that the FDIC does not like what it is seeing with respect to marks on the HELOC books," Paul Miller, a bank analyst at FBR Capital Markets in Arlington, Virginia, said in an e-mail today. A drop in values has left about 22 percent of the nation's 93 million houses, condos and co-ops with mortgages that exceed the value of the properties as of March 31, Seattle-based real estate data service Zillow.com said in a report May 6. Banks held a record $674 billion of HELOCs and $211 billion of closed- end home-equity debt as of March 31, according to FDIC data.
3. The oil price rose over US$70/bbl last night and the International Energy Agency's (IEA) chief economist Fatih Birol told the FT that a price that high could dampen any global economic recovery. Interestingly, he talked about supply problems.
The real problem, he said, was declining investment in oil production, which if anything had worsened in recent months. "If there is a continuation of declining investment in the upstream sector, in a few years' time we may have major difficulties." He said Chinese demand would be an important determinant of oil prices, and the worldwide supply and demand balance could become very tight if other countries began to grow in 2011 or 2012.
4. Gideon Rachman at the FT has an excellent piece on the pressures building in Eastern Europe that could hammer Western Europe's banks and economy. There are plenty of juicy facts. Lithuania's economy contracted at an annual rate of 22.4% in the June quarter. Latvian public sector wages have been cut by a third this year. The big problem is the EU is refusing to allow the Baltics to drop their currency pegs to the Euro.
Despite the region's small size, the intensifying crisis in the Baltics cannot be treated as a freakish local squall of little concern to outsiders. Bank failures or plunging currencies in the three Baltic nations "“ Latvia, Lithuania and Estonia "“ could threaten the fragile prospect of recovery in the rest of Europe. These countries also sit on one of the world's most sensitive political fault-lines. They are the European Union's frontier states, bordering Russia.
5. Australia is preparing for higher interest rates, the Sydney Morning Herald reports. I only wish New Zealand was doing the same.
CANBERRA has begun preparing the way for higher interest rates, declaring that the present low rates "˜"˜can't stay that way forever'' and expressing sympathy for banks such as Westpac that have already begun pushing up fixed-term mortgage rates. Ahead of an announcement from the Reserve Bank this afternoon expected to signal that its next move is up, federal Financial Services Minister Chris Bowen said he understood Westpac's decision to push up its fixed-term rates by 0.1 percentage point. He said those rates were "˜"˜largely set by expectations'' and there were "˜"˜signs of increased interest rates and cost of capital around the world''.
6. Remember MFS and the utterly ridiculous collection of travel agencies that it owned called Stella? MFS Pacific investors in New Zealand will remember with some pain. Ian Verrender at the Sydney Morning Herald has an excellent piece on the fallout from MFS and Stella. It is mostly a tale of how woeful private equity firm CVC was and the exposure faced by UBS.
In 2007, as the private equity boom swept the world, ensnaring anything and everything in its net, CVC Asia Pacific made an offer to buy half the Stella operations for a whopping A$1.2 billion. This was about the same time that CVC became James Packer's very own version of Alan Bond when it bought control of PBL, again for a ridiculous amount of money. Luckily for CVC, its mad offer for Stella "“ nicknamed Project Swift "“ was turned down. Eight months later, in February last year, as MFS entered its death throes, the private equiteers returned and emerged like heroes after picking up 65 per cent of Stella for $400 million. As it transpires, Stella was not the bargain it had then appeared. It never reached its promised earnings, and last month CVC bought the remaining 35 per cent for just A$3.2 million. That's right, the business that cost $2.26 billion to assemble now carries a price tag of less than $10 million.
7. George Magnus at UBS has a useful piece in The Times that warns the retiring baby-boomers risk sinking the global economy back into stagnancy just as it starts recovering from the 2008 crisis. Are we ready for a couple of decades of slow growth globally?
As the baby boomers "” roughly 20-25 per cent of the population in most advanced nations "” retire and swell the over-65 segment of the population, the labour supply will fall, or rise only modestly, because of low or declining birth rates. The working age population will grow slowly in the US and the UK, but in most of Europe it is starting to decline now. In Japan, this has been happening for almost a decade already. In the absence of policy changes, growth will be reduced, and the rise in old age dependency will generate significant financial stress. The main policy shift should be to strengthen labour input and output through employment-creating infrastructure programmes, raising the participation of over 55s and women in the labour force, the pursuit of phased retirement and flexible working practices, and the provision of lifelong learning programmes.
9. Felix Salmon at Reuters, who is closely watched in financial market circles, has pointed out that Australia's housing bubble was (and still is) bigger than America's housing bubble and has yet to burst. Luckily no one has pointed out New Zealand's valuations to him yet... 
Between 1992 and 2008, real Australian house prices, as measured by the OECD, rose by 95% in real terms, while US house prices rose by 40%. Or, for that matter, ignore the crazy bubble years of 2002 and 2003, and just look at house prices since Australian "policy makers were able to prevent prices from getting too far out of whack": between 2004 and 2008, US house prices rose 12% in real terms, while Australian house prices rose 17%. Australia did have a property bubble, and prices did get out of control, especially in 2002-3. The main difference between Australia and the US is that Australia's property bubble hasn't burst yet.
10. Matt Nolan argues against my 10 reasons why Fitch should downgrade NZ in his TVHE post here. It's well worth a read. Here's his conclusions.
I personally think that there are issues with:Fundamentally, NZ faces a wedge between the private and social benefits of different investment (as a result of transfers, tax, poor information etc) and we have gradually built up a large debt position as a result. However, the above discussion of the 10 points on why we need to be downgraded is enough to make me believe that the issue MAY be overcooked. Ultimately, I hope the issue is overcooked, but I also hope that we can sort out appropriate policy before we really do face a credit downgrade.
- Incentives to invest,
- Direction of government spending,
- Incentives to produce,
- Information.
Finally, here's a Bloomberg video on how banks are setting aside US$20 billion in bonuses and what it means for those who benefit from the wealth trickling down. Normal service is resumed.
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