Top 10 links: Blogger unmasks fraudster; CDO cancer; Inflation the cure?; Auckland housing shortage?; Fonterra milk mountain

Here's my top 10 links from the last 24 hours or so. I welcome your suggestions below. A housing shortage in Auckland? BIS Sharpnel, the Australian housing research group, is reported by Stuff as saying Auckland faces a housing shortage and therefore there will be upward pressure on prices eventually. GSJBW economist Shamubeel Eaqub is dismissive.

"If they had bothered to look at the census data, they would have seen that the share of unoccupied dwellings in Auckland has risen from 5.3 percent in 1996 to 7 percent in 2006," says Eaqub.

Your view? Eaqub is very sure of himself. But I wonder if that Census data can be relied given its age. Trust John to turn back the clock John Minto (yes Mr HART) opines in his blog on stuff about the good old days when we had locally owned Trust banks. He has quite a bit of support in the comments. There is a mood building of grumpiness generally about our banks, fed no doubt by the righteous anger overseas about bad banks and bankers. It would be a mistake to assume bankers are bad just because they run banks. Some of the mood music is beginning to sound like something from the 1930s, but without the anti-Semitism (usually). We know where all that led. Let's hope the mood remains merely grumbly rather than angry here. John Minto's comments are stoking the fire. Please please give us even more money GM is pleading for yet more taxpayers mone,y but the bond holders who need to approve any deal are getting restless. They want more cost cuts in exchange for support for a crucial debt for equity swap. What price on GM being bankrupt within a month? This in the WSJ.com. Fonterra's milk powder mountain Bruce Sheppard muses in his blog on stuff about the milk powder mountains that Fonterra is storing in warehouses up and down the country and concludes that investors who bought Fonterra bonds may regret it in future. He also states that taxpayers bear the risk of a Fonterra failure. Hmmm. We'll see. Here's a taste.

If milk powder was indeed a durable, one day this mess would fix itself and the mountains would be mined and turned into white gold. But sadly milk powder doesn't last forever, even with melamine added to it. After two or three years it has to be dumped. The likelihood of these mountains of stock having a value equal to the carrying value that Fonterra's accounts reflect is very low.

Here's a brave man Another Madoff-style fraud story has exploded in the last 24 hours and one analyst and blogger can take credit for it. Alex Dalmady is an independent analyst who published a story in mid-February in an obscure Venezuelan economics magazine about how 'Sir' Allen Stanford's Antiguan bank had produced 'incredible' (as in not believeable) returns for years without question. The SEC, who apparently have been investigating for a while, have now accused Standard of US$8 billion of fraud by falsely stating high returns. This will run and run. It looks like a Ponzi scheme and the Stanford group has US$50 billion of assets under management. Stanford is the guy behind the bizarre 20-20 match between England and West Indies where US$20 million was awarded as a price. I always worry about banks operating out of the Carribean. There's too much illicit money and goods travelling around in speed boats and small planes to be good for anyone. The US$100 billion timebomb in CLOs The FT reports today that S&P has warned that US$100 billion of Collateralised Loan Obligations are exposed through a cascading series of links to the collapses of just a handful of companies.   

'Financial Stalingrad'

European stocks and the euro slumped overnight after Moody's warned that banks in Austria, France, Italy, Belgium and Sweden faced massive losses on US$1.5 trillion of loans made to Poland, the Baltics, Hungary, Croatia and Serbia as Eastern European economies slowed dramatically.

The Polish Zloty and Hungarian Forint hit multi-year lows and the Euro slumped to a 3 month low. More than half of the assets in Austria's banking system are exposed to Eastern Europe.

See a fuller report here.   The CDO cancer killing the banks Christopher Whalen, a renowned US banking commentator, writes a detailed analysis in the Globalist of the problems still lurking beneath the surface in the Collateralised Debt Obligations (CDOs) market. He picks out the European banks in particular as vulnerable. The more I look at this the more I wonder if the Northern Hemisphere banking world will survive in anything like its current shape.  Inflation will save us... Finally someone has come out and said we should inflate our way out of trouble globally. LSE Reader Tim Leunig puts forward the idea of increasing the Bank of England's inflation target to help inflate consumers and banks out of trouble. Here's a taste.

Banks would gain in three ways. Inflation reduces future bad debts by making debt servicing easier. It makes defaults less costly because real collateral is more likely to exceed nominal debt. Finally, it makes existing bad debts less onerous on the balance sheet. This reduces the need for government recapitalisations and "bad banks" and increases the ability of governments to sell recently acquired banks. This, in turn, reduces the debt burden on future taxpayers.

It's all in the cloud. This is way off topic for a financial news and information website, but it's something I found useful as an internet publisher. This is a long (way too long) musing by Google's SVP, Product Management Jonathan Rosenberg, about where the internet is headed. He sees 4 trends: All the world's information will be accessible from the palm of every person; Everyone can publish, and everyone will; When data is abundant, intelligence will win; The vast majority of computing will occur in the cloud. I agree with all of those, although I do worry about Google being the only cloud. I like this comment too...

We need to make it easier for the experts, journalists, and editors that we actually trust to publish their work under an authorship model that is authenticated and extensible, and then to monetize in a meaningful way.

Yes please. Perhaps Google could give publishers a bigger share of their adsense revenues (whatever that share might be...) so journalists can make money from blogs. Most blogs in New Zealand try to avoid adsense because it pays peanuts. Hat-tip to Chris Crum at webpronews.