Bernard Hickey details the key news overnight in 90 seconds at 9 am with Bank of New Zealand, including news that stock markets broadly and banking stocks in particular fell overnight in Europe and the United States after French and German leaders failed to agree on the creation of common Eurozone bonds.
This idea is seen as one of the solutions to the European Sovereign debt crisis, which is worrying investors in European and US banks. See more here at Reuters on the disappointment from the summit.
Fears about a lack of a solution to the European crisis saw gold rise to a fresh record high of almost US1,800/oz as investors sought safe havens. Also, concerns about US inflation returned as wholesale prices rose more than forecast in July. See more here at Bloomberg.
The Dow closed up 4 points and the S&P 500 rose 1 point, while the Nasdaq fell 0.5% after Dell disappointed with weak sales. See more here at Bloomberg.
There was also some disappointment from stock investors after two Federal Reserve monetary policy committee members explained their dissenting votes from last week's decision to hold the Fed Funds rate at near zero% until 2013. See more here from Bloomberg on Richard Fisher's comments about the 'Bernanke Put'
Meanwhile, the Swiss franc rose as the Swiss National Bank appeared to drop any suggestion of a peg or target for the franc as it struggles to stop safe haven buying pushing its currency up and hurting exporters. See more here at Bloomberg.
Instead the central bank pledged again to flood the banking system with liquidity to try to drag already low interest rates lower and make the franc less attractive.
Meanwhile, in India, street and social media protests are growing against corruption, led in part of a new Ghandi-type figure who is fasting to protest against corruption.
Some see the widespread protests as similar to the Arab Spring of last year. See more here at Reuters.
The New Zealand dollar firmed overnight to just over 84 USc before easing back below 84 USc.
Yesterday, New Zealand Comfort Group, which makes Sleepyhead beds, announced plans to close its newly acquired Avondale factory for Dunlop living because of cheap imports. It has 458 workers. See more here at NZHerald.
No chart with that title exists.
45 Comments
The Australian Financial Review says Japan's Asahi will announce the NZ$1.5 billion acquisition of Independent Liquor today from Pacific Equity Partners, Unitas Capital and Lynne Erceg. I think the price tag includes Indy Liquor's debt but still looks ridiculously high to me.
Let me see...when did I get to discover anything really important about 'sleepyhead' beds..how they are made...why they are better than imports...nope....can't remember ever seeing a dam thing....yet the gogglebox has all sorts of how it is made fill in stuff from overseas...so here's the question....what is wrong with the marketing of sleepyhead product?
It is a really good piece AndrewJ......but once again without a Woodward and Bernstien...leaves you feeling more suspicious ...frustrated.....angry.
It's funny how little changes despite the sophistication of a society...we still want the heads on a stick........we still get the sacrificial lambs...(The Madoff's...the Martha Stewart's...etc)
Christov: Sacrificial Lambs. Notice how the yanquis went after BP last year like a rat up a drainpipe, then Obama was going to get answers to the May 2010 "flash crash" (never did), and now they are going after Murdock with the same fervour, and in the UK they are jailing drongos for 4 years for using their (expensive) blackberries and iPhones to twitter their mates. Yet the protected species on wall street keep getting protected.
Christov: I understand .. Madoff, being a member of the Brotherhood (having indirectly alluded to them before) committed the unforgiveable sin of being "caught out" and thus self-sacrificed knowing the wrath he would incur at the hands of the Brotherhood and that was ex-communication and ostracism and the closing of the door to the promised land. Banished for 150 years. He wasn't exactly detected by the SEC or the FBI or the DOJ. In fact they ALL went to enormous lengths to do a Horatio Nelson for him. Or was it the 3 monkeys.
I see the Kiwi frruit industry is in trouble. I looked in the back of a farming paper and was surprised at the number of Kiwi fruit farms for sale. I asked a rep he said that PSA is wiping the industry out, they have rural support staff in contact with numerous growers facing massive losses, many being wiped out. he said the industry is in survival mode soon, they are agressively spraying to stop the spread of PSA but its going to be nearly impossible to stop. He thinks its now affecting our markets. Anyone know more?
Maybe Tony Chaston could do some investigating. I think your second question was covered in the media when the story of the disease first broke (from memory MAF approved the imports).
In terms of who is in charge, I think MAF's last Director General moved earlier this year to a role in Christchurch reconstruction (again from memory).
Hi Andrewj I am involved in kiwifruit and its horrific to see the industry slowly being destroyed. Most growers are in a state of shock and the ones that have been wiped out are left with nothing with their income and capital value of their land gone. We are waiting for the bug to hit our blocks and then its goodnight nurse for our enterprise. but it also looks like the high exchange rate will double wammy us as well in the next couple of years.
Most people think that it was dodgy pollen imports that brought the bug in but with MAF doing the investigations, they aren’t going to blame themselves for allowing this plant material in are they...
A 1.3 billion export earning industry going by the wayside and the govt does not seem to care. My sister who is in Oz says that if that happened over there would be all sorts of hue an cry and MAF would be under the searchlight , ministers resigning etc. here it is "move along sir nothing to see"
Miggle, I heard nothing about it till now, they have kept the whole mess under the radar. Ive got a few grapes Im meant to be cutting them out in a few weeks. Im in HB and there are some big apple orchards being pulled as we speak, there are so few family owned orchards left now. Ive also got some sheep but it looks like this seasons crop of lambs are going to worth a lot less than we were lead to expect. I was hoping for over $100, now anything over $80 looks to be good. The beef schedule is miles back too, that was a pretty short boom for us, but we dont have the costs you have so just pare the farm back a bit, im even looking at retiring some land, ive about 30 acres i think I will take out of production and start to plant in trees over 5 years.
Im so pleased you posted its good to hear it from the horses mouth.
Colin, its not a conspiracy , well maybe the coverup, but the main crime apears to be incompetence, more like I shot my own foot off. I don't understand how we just magicaly lose a 1.5 billion $ industry and its inconsequental to the economy, after years of being lauded as a major contributor. Its a major employer and I would think a major contributor to IRD, think of all the packhouses and reps with no work.
So why is John Key being so upbeat about the New Zealand economy returning to surpluses? Apples, Wine and now Kiwifruit - combined $2.5 billion of exports pa - all looking non-viable. That is horticulture with large numbers of employees. Then agriculture - not so labour intensive but with beef down, lamb down, logs down and dairy products still falling.
And John still believes Treasury's forecasts of returning to surplus in 2014. I think he is starting to have an issue with credibility.
Because Mr Key appears to live in another reality like this guy
http://www.youtube.com/watch?v=loeLLyhatco
4000 permanent employees 2000 odd related industries employees and over 10000
partime seasonal staff that work up to 4 months during harvest and cool storage season.
An estimated 300 million in tax revenue to the IRD per year
Zespri had a plan to grow the industry to a $3 billion a year size (all export)
To stuff this one up would be Incompetence on a grand scale one would say
After a trip to Germany early last year I warned here on interest.co that there was a nasty nationalistic/racist component to this euro situation, which was evolving even then.
In the second half of the year I travelled with a group of Germans in Namibia. The picture was the same.
Even the educated and well-travelled German does not really want to discuss these matters. They have a sort of mantra about the med countries 'We work a lot harder than them so we deserve a lot more.' Never mind whether it's really true.
To try and get someone to see that maybe German-enforced low euro interest rates may have contributed to the proprty bubble in, say, Spain, is difficult if not impossible. If the Spanish had a property bubble, that's their fault, end of story.
Germany is a great and beautiful country, full of lovely people, but for whatever reasons, it is sowing seeds which we may all have to grimly reap.
If Angela Merkel, who surely must get all this, is going to do something, she is leaving it awfully late. The clown Sarkozy don't impress me much, although Ambrose has suggested a role for him which would be perfect.
Sleepyhead beds for ministers.
It seems we aren’t learning from America and increasingly let companies, which “make things” in this country disappear.
Yes – PM we can create a “South Pacific Financial Hub” - the question is, in which sectors of industries is the majority of Kiwis capable/ willing to work in. Yes – import more foreigners and let the Kiwis and youngsters be unemployed.
As I explained many times this government just doesn’t support decent job opportunities in the production sector for the wider NZpublic.
Kunst , good comment. Bernard Hickey should start banging the drum louder and more about the gutting of NZ's productive capacity due to the strong Dollar .
We live in exceptional times which call for exceptional measures , and while I have the utmost respect for Dr Bollard , he is too straghtjacketed in his approach following economic textbook theory too rigidly .
Its time NZ's self interest got brough to the fore, and we need to look after our own , like the Swiss and the Japanese .
PDK, has alot to do with corporatising farming. I think in HB there are 4 independent apple growers, the rest are corporate or lease their orchard to a corporate. I hear on the Grape vine that Mr Fay wants to buy Crafars. I was right about Kiwi fruit the market appears to have tipped over, never mind some big corporate will move in and buy the farms off the bankers.
BREAKING NEWS: Today's decision on the fate of Kaiapoi was not an easy one, earthquake recovery Minister Gerry Brownlee said.
Of the 1330 residential properties zoned orange for further investigation on 23 June, 860 in Kaiapoi and 80 in Pines Beach have now been zoned red, 220 in the northern part of Kaiapoi have been zoned green and a further 70 in the western part of Kaiapoi will remain in the orange zone for the time being for further investigative work.
http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/5467295/1000-homes-red-zoned
FYI on chch
Following careful consideration the government will be making offers to purchase a further 940 properties in Kaiapoi and Pines Beach north of Christchurch, Canterbury Earthquake Recovery Minister Gerry Brownlee has announced today.
Of the 1230 residential properties zoned orange for further investigation on 23 June, 860 in Kaiapoi and 80 in Pines Beach have now been zoned red, 220 in the northern part of Kaiapoi have been zoned green and a further 70 in the western part of Kaiapoi will remain in the orange zone for the time being for further investigative work.
Mr Brownlee said today’s decision was not an easy one, given the size of the town and the incredible patience shown by its residents since September.
“Many options have been exhaustively considered; however, in full evaluation of the facts today’s decision was also clear cut.
“Just as we did when we announced the first residential red zone on 23 June we considered a huge amount of geotechnical engineering advice and a range of other factors.
“One inescapable fact was that the land and critical infrastructure beneath the hardest hit parts of Kaiapoi and Pines Beach was so badly damaged that any remediation solution would have required the complete removal of all homes we’re zoning red today.
“Repair in all the red areas would not only require raising the height of the land but also a complete replacement of essential infrastructure like sewer, water, electricity and roading.
“This, like other areas we’ve zoned red, would have meant residents would have been forced off their land for a period of years.
“There were also no guarantees that the remediation solutions available, regardless of cost, would have worked,” Mr Brownlee said.
While significant government funded land remediation works were due to begin in the Waimakariri District at the end of June, these were put on hold so assessment could take place of how the many earthquakes subsequent to last September’s big shake had impacted on the land.
“That impact was significant,” Mr Brownlee said.
“Whether the perimeter works agreed on last October still stacked up needed to be evaluated, and the clear answer for most of Kaiapoi and all of Pines Beach was they didn’t.”
A decision on the 70 orange zoned properties should be made within the next few weeks.
All residents whose properties have been zoned red today will receive offers from the government to purchase their property, and all will be subject to the same support, financial or otherwise, as those residents zoned red on 23 June.
It has been determined that the most appropriate rating valuation to inform the government’s offers is the 2008 valuation, as that was the rating valuation in place on 3 September 2010.
Waimakariri residents zoned orange before today can begin checking thewww.landcheck.org.nz website or phone 0800 RING CERA (0800 7464 2372) to learn of their new zone.
Personalised packs informing residents of the decision and what it means for them will arrive in the mail over the next few days.
“We had hoped to have those packs arrive in conjunction with this announcement, but with postal services severely disrupted this week that can’t happen.
“However we thought it was important we release this information as soon as possible. I know the Waimakariri District Council is undertaking significant outreach for affected residents from today and I'd like to thank them for that.
“Today’s news will be difficult for many people who’ve bravely hung on for nearly a year in the hope their property could be built on.
“While the news will disappoint some it also provides a clear, and we believe fair path ahead for the hardest hit residents of the Waimakariri District,” Mr Brownlee said.
CERA is responsible for rebuilding greater Christchurch and its surrounds, and supporting the welfare of its residents. For more information on the announcement, including an extensive Q&A, footage, maps and technical slides which supported today’s presentation, visitwww.cera.govt.nz
I seem to recall saying the land was buggered and the plan to throw money at holes was a stupid idea..way back after the first quake!.
But watch this space because the question not answered is....what happens to the land once the houses are gone.....anyone for a payoff!
Will they become parks or will they become industrial sites and rubbish dumps?
FYI from Chris J via email:
Bernard, I haven't seen an article on the 860 homes declared in the red zone today. See - www.cera.govt.nz
The total value of those properties would be $250-300m, much of which won't be insured as the damage to homes in some of those areas is not as extensive as you would imagine (generally only suffered damage in September). Many homes will be considered repairable by insurers as they only need repiling or new foundations, undoubtedly some will be totally undamaged.
Land values in the area average $140-150,000. So in broad terms $125m will be roughly the cost for the Govt for the land and say $150m for the improvements. EQC insurance should cover most of the land cost (certainly at least $100m anyway), EQC on buildings will cover $100m, private insurance will cover the remaining $50m if the buildings are irreparably damaged but as that is probably less than half, and maybe only a third then the cost to Govt could be $35m plus any additional cost above EQC payouts for the land say maybe $15m.
So perhaps total costs are $50m to Government. Then they also actually save $30 to 40m in not having to rebuild services and roads. So it doesn't seem too bad.
Now also consider that by not having to provide new land, they are getting the land at very low prices, sometimes 30% below market value, they are also winning by having anyone buying a new section also paying (in the new section price) a development contribution of perhaps $20,000. So if everyone actually repurchased a section the net cost to Central and Local Government is actually negligible (or in fact abandoning the land may have actually been profitable).
Add on top of that the Govt will have the salvage value of the undamaged properties, which if considered as relocatables could be worth $30m plus. Easily covering any cost associated with clearing the land.
Now if you actually look at individual properties in the area, you will see that in some (certainly not all) but in some case GVs are well below market value and in many cases land values are well below what market value would have been.
So it seems rather unfair to be paying these arbitrary GVs and penalising insured victims of a disaster by paying them less than it would cost to replace their property or indeed less than what the market value would have been. For instance (in some cases) sections in North Kaiapoi have GVs around $120k for 800m2. Market value for that size of section is perhaps $170-190,000.
The Government's taking the easy approach here which may certainly see some who have undamaged homes and others who have low land values disadvantaged.
Given the complexity of the issues and the fact that every privately insured property will have a market valuation done anyway, it seems bizarre not to have agreed to pay at least the market value in all of the red zones, especially since the cost would be minor and declaring these red zones may actually work out to be profitable for the Govt when all things are considered.
I know a lot of people are at their wits end, so will jump at these red zone offers even if it is less than what they believe is fair because they just want to move on (in many cases - out of ChCh and surrounds), it would have been nice if the Government actually at least guaranteed market value rather than just trying to keep it simple.
Feel free to use the numbers I mention above to do your own calculations as to cost, but also consider that if the Government picks up full replacement value on properties that people have just opted to take the Government deal on, then the whole red zone deal may actually (rather perversely) turn out to be a profitable exercise.
Regards
chrisj
Big bank theft in Aitutaki. "Police Commissioner Maara Tetava said a large amount of money was stolen ($200k), but would not confirm the bank was secured only by a single padlock." - http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=107458…
FTA with USA. here's your entree:
http://www.stuff.co.nz/business/world/5465656/Tobacco-giants-sue-over-labels
FYI from a reader via email:
Was thinking about Margaret Thatcher's quote about the problem with socialism being that you eventually run out of other people's money.
Seems that this is currently the problem with capitalism as well with the world being unable to pay it's debts.
Could not think of anyone else who might be interested. Chances are you probably aren't either but have told you anyway.
Best regards
Paul
Interesting outlook....the depression really happned in about 3 years, right now though businesses are cash rich, so 6 years? 10 years? a sloooow slide....
"households are in far worse shape now than in the 1930s, with a peak debt level that is two and a half times as high as it was in 1930. That’s why the crisis now is manifesting itself in stagnant consumer demand. It doesn’t involve the same plunge into deflation as the Great Depression, but it does imply a more drawn out deleveraging, because it’s much harder for households to reduce debt than it is for businesses. Businesses can get out of debt by going bankrupt, sacking workers, and stopping investment. Households have to live with the shame of bankruptcy and the limitations it imposes on behaviour in future, they can’t sack the kids, and it’s impossible to stop consuming completely. So we may face a far more drawn out process of deleveraging than the Great Depression."
http://www.debtdeflation.com/blogs/
regards
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