Here are my Top 10 links from around the Internet at 10 to 10 am, brought to you in association with New Zealand Mint for your reading pleasure.
I welcome your additions and comments below, or please send suggestions for Thursday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.
I'll pop any surplus suggestions I get into the comment stream under the Top 10.
1. Could we be pouring more bad money after/before good money - The New Zealand taxpayer may be about to pour NZ$750 million in fresh capital into South Canterbury Finance, the New Zealand Herald's Adam Bennett has reported.
Hard to believe. There arn't any named sources backing this suggestion except for Chris Lee...
But the taxpayer is already on the hook (provisioned) for over NZ$800 million for South Canterbury.
Is this extend and pretend Zombieland stuff or a prudent measure to protect taxpayer funds?
I welcome your views below
Kapiti Coast financial adviser Chris Lee told the Herald he believed the company would announce a a recapitalisation plan this week "and it will involve the Government making concessions to try and help South Canterbury survive".
Another source said "a significant development" was expected this week involving a Government-supported recapitalisation. However South Canterbury founder Allan Hubbard would be required to relinquish all ownership of South Canterbury and associated companies.
The source understood in return Hubbard would not face any charges that may arise from the current Serious Fraud Office investigation into his affairs initiated two months ago.
2. SFO backing away - The ODT is reporting supporters of Allan Hubbard saying the SFO is backing away from its fraud investigation into Allan Hubbard, citing correspondence. The drums are beating. I wonder if Adam Feeley is listening.
Paul Carruthers, who runs the website www.standbyhubbard.org, said he was aware the letters were being received by investors and believed it was evidence the SFO was stepping back from the investigation.
"The letter is clearly an indication the SFO is not investigating with the vigour it stated it would be at the start of the process.
"My take on it is that it is looking possible they won't find any evidence of fraud. Asking people to use an 0800 phone number, it's like booking a flight." Supporters and investors had been frustrated by the "complete lack of transparency" from the SFO during its investigation, Mr Carruthers said.
3. A make believe recovery - Matthew Lynn at Bloomberg doesn't believe the European debt crisis is over, despite the recent outward appearances of stability. He makes a strong case.
Here’s why we should be skeptical. First, the euro area remains as dangerously imbalanced as always. Take a look at those growth figures. In the second quarter, German gross domestic product grew 2.2 percent. Other countries didn’t do nearly so well. Greece’s economy shrank 1.5 percent, while Spain registered just 0.2 percent growth. The debt crisis has even helped Germany by weakening the euro, thereby strengthening its exports. It has hardly helped nations like Greece because they don’t export much. Instead, the euro area is more lopsided. Germans are getting wealthier, yet they are being forced to subsidize Greeks who are getting poorer. That won’t be sustainable for long.
Second, opposition to the bailouts may grow. Slovakia has understandably refused to ratify its share of the rescue package. Any political system needs to be both fair and reasonable to command support. The terms of the bailout are neither. You can’t tell relatively poor, hard-working people who have played by the rules, like the Slovaks, that they have to help out countries that didn’t, such as Greece. You might get away with it once or twice, but if the euro area is simply a mechanism for transferring wealth from the industrious to the feckless, it is hard to see it surviving. The responsible nations are going to want out at some point. \
Slovakia will no doubt be ignored. The EU doesn’t pay much attention to protests from its smaller members, particularly from Eastern Europe. But Portugal and Ireland, which will also have to help Greece, may join the protest soon. Even if they don’t, the billions in aid and loan guarantees promised for Greece and the other deficit countries can’t be taken for granted. The new government in Slovakia was elected on a platform of opposing the bailout. “Say no to the Greeks” is a great campaign theme and will surely be copied in the region.
4. You just can't win - America is trying to drive down its long term interest rates to boost the economy, but it seems this is discouraging the Chinese from buying the bonds. Woops. Here's the Bloomberg report on China's biggest ever cut in its holding of US Treasuries.
The Asian nation’s holdings of long-term Treasuries fell by $21.2 billion in June to $839.7 billion, a U.S. government report showed yesterday. Total Chinese investment in U.S. debt declined 2.8 percent to $843.7 billion, the least in a year, following a 3.6 percent slide in May. China, America’s largest creditor, is cutting back after scrapping its currency peg in June, giving it less reason to buy dollars and invest them in Treasuries.
China is also turning more bullish on Europe and Japan, purchasing bonds of both nations. The shift comes as President Barack Obama increases U.S. debt to record levels, counting on overseas investors to buy, as he borrows to sustain the U.S. economic expansion. “This may have been opportunistic,” said James Caron, head of U.S. interest-rate strategy in New York at Morgan Stanley, one of 18 primary dealers that trade with the Federal Reserve. “Look at the level of yields. If you’ve held a lot of Treasuries, you’ve done well.”
5. The problem with a high copper price - The Manawatu Standard reports that vandals (thieves) have shut down TrustPower's wind farm near Palmerston North after they broke into a transformer yard to steal copper earthing wire. Now there's a dangerous past-time. Note to Wolly. Buy the copper instead. (Just kidding)
"It's a nuisance for us more than anything. These people put themselves in life-threatening danger and caused thousands of dollars worth of damage for a few hundred dollars worth of wire, which they didn't even manage to make off with." Mr Purches said while some parts of the site have security cameras, the transformer yard didn't, and this was being reviewed.
"Because of the serious danger of entering one of these areas, it's not normally a place you need security cameras on. "You'd have to be a complete bloody lunatic to go near one, but we are reviewing this regardless."
6. It's been bigger before - China is returning to its rightful place in the world near the top of the economic output rankings, this chart below from The Economist indicates. It shows China and India being the world's biggest economies for most of the last 2000 years. Now China is the world's second biggest.
7. More Australian housing bubble worry worts - \Now Morgan Stanley is saying the Australian housing market is overvalued, The Australian reports.
In a bearish note to clients this morning, Morgan Stanley strategist chief strategist Gerard Minack warned Australia's housing "bubble" could be pricked should banks tighten credit or "loss-making" middle-class landlords start to sell.
He argues owner-occupiers are in too much debt and investors are riskily relying on capital gains to repay their loans and interest repayments, The Australian reported. Compounding the problem is "ill-advised policy", such as the government's first home-buyers grant, which has combined to make Australian houses "40 per cent above fair value", Mr Minack says. "Buying an asset that's over-priced never ends well," he said. "The real return on residential property over the next decade is likely to be negative, in my view."
"Owner-occupiers have played a game of financial chicken, competing for property by taking on increasingly imprudent amounts of debt. "Investors have become Ponzi borrowers -- Hyman Minsky's term for borrowers who rely on capital gains to repay debt and interest -- in the belief that housing is a sure-fire long-term investment. History shows that it isn't."
Ya don't say...
8. 'So it does get in' - Remember that ad where the manicurist Madge uses Palmolive to soften a customer's hands? "You know you're soaking in it," she says. "So it does get in".
Now we have a Nielsen survey commissioned by Realestate.co.nz that shows the government's tax changes are really having an impact on property investors attitudes to investing. Alistair Helm at unconditional has the full story and this instructive chart. The wonderful 'It does get in' video is below that.
When it came to asking about buying intentions of the 1,225 survey respondents, it showed that their intention to buy an investment property had slumped by 40% in a year. Last year 1 in 4 of all those surveyed said that their intention was to buy an investment property. Just 12 months later when this survey was undertaken in May/June of this year that intention had slumped to just 1 in 7 – just 15%; the lowest level seen in the past 4 years of this annual survey.
9. Totally relevant video - I know we have many property investors that read our site. So I thought I'd put up this video showing a very reasonable investment property up for sale in San Francisco. Only US$47 million. Negative gearing anyone?
10. Totally irrelevant video - I hate painting, which I'm sometimes instructed to do by my good wife.
This painting video, however, looks like fun.
Virgin Atlantic plane livery time-lapse movie from johnson banks on Vimeo.
36 Comments
Author: Lawrence Williams
Posted: Friday , 13 Aug 2010
LONDON -
The Muslim-governed northeastern Malaysian state of Kelantan has, according to an AP report, introduced gold dinars and silver dirham coinage which state officials say is the revival of currency circulated in early Islamic societies. State officials were quoted as saying that the gold and silver coinage is a better alternative to currencies affected by the fluctuations in value of the U.S. dollar and other foreign currencies.
The gold and silver coinage was introduced on Thursday and the new gold dinar and silver dirham coins will be able to be used at around 1,000 outlets in the state capital city of Kota Bharu while the state government is also considering the option of paying part of employee salaries with the new coinage.
Rest of the article here:
http://www.mineweb.co.za/mineweb/view/mineweb/en/page32?oid=109729&sn=D…
Yes Copper theft is coming to a downpipe near you. I wonder whether the windpower infrastructure owners realise the crooks are all watching and waiting for the wind to stop! Seems to be a lot safer when the blades have stopped turning and even better when the punnishment dished out amounts to a good telling off.
Sold out of copper BH...made some dosh in the process.
It's a hostile offer CP...depends on shareholders selling out well below valuation...no certainty at all. What price will the Potash mob be when the next leg down arrives...which it will? Pay close attention to the US....the post mid terms period could well be one of chaos in the market at the end of the year. Buy in the dips CP. I bought pna at 15 cents!
Excellent piece from Calculated risk as to why the next leg downwards in the US housing market is in the process of starting:
http://www.calculatedriskblog.com/2010/08/regional-reports-home-sales-f…
Falling house prices are of course immensely beneficial to the US economy as a whole (just impersonating a CNBC talking head for a moment).
Anyone see any similarities with the NZ market in the way that inventory build up is about to lead to further house price falls?
Rents aren't rising in Australia, at least not in WA where there is an equilibrium between vacancy and demand. WA is supposedly the 'boom' state, with the boom coming from the resources it sells to china. Many blame the propopsed resource tax for a recent decline in 'resource profits' but i wonder if it has something to do with recent slow down in china.
Even Dr.Don Brash of the North..well Orewa anyway..says PI is stuffed
from the landlords site today:
Dr Don's gloomy outlook for house prices
The world economy looks sick and if that continues it is hard to see house prices going up according to managing director of Huljich Wealth Management Dr Don Brash.
Speaking at the New Zealand Mortgage Brokers Association (NZMBA) conference about house prices, Brash says over the last three years the median house price has moved around for a small upward movement - which looks encouragingly stable.
However, he says household sector debt has grown enormously over the last 30 years from 40% at the beginning of the 80s to 160%, which means it has increased fourfold.
He says household sector debt service has also risen, though not as much because of lower interest rates, but would rise further if interest rates increase.
Brash says net immigration which has traditionally been a big driver of increases in house prices also now looks soggy.
He also acknowledged that Government policy threatens house prices in three ways:
- Reduction in top personal tax rate from 38% to 33% reduces the attractiveness of losses arising from property investment
- Inability to claim depreciation on buildings which have a life of more than 50 years also reduces the attractiveness of property investment
- A government-appointed advisory group has been looking at the effect of Metropolitan Urban Limits (and similar restraints) on the price of residential land – which might lead to a change in policy which frees up supply of residential land.
The Economist has also suggested that many housing markets remain overcooked, with New Zealand fourth on the list with 23.7% overvaluation in house prices.
He says when you look at the path of real house prices in New Zealand since 1970 it's easy to be pessimistic and if the public thinks it couldn't see a big fall in real house prices in New Zealand, all it needs to do is look at the example of Japanese real land prices which have been declining since 1990.
Meanwhile across the ditch those sneaky ole Landlords are at it...big time?Housing bear warns again of bubble waiting to burst august 18, 2010
AN ARMY of loss-making landlords threatens to deflate Australian house prices, posing a risk to economic stability, a leading analyst has warned.
Morgan Stanley's equity strategist, Gerard Minack, has joined a growing number of observers to claim house prices are a bubble that has raised the level of risk in the economy.
While local house prices have defied global trends in recent years, Mr Minack argued their explosion in the past decade had forced them well beyond ''fair value''.In a note to clients yesterday, he argued measures of value - such as house prices compared with rental returns or household disposable income - suggested they were overvalued by 35 to 50 per cent.While this claim echoes recent concerns from abroad, such as those made by the Economist magazine and US hedge fund investor Jeremy Grantham, Mr Minack's view differed through its emphasis on an ''army of loss-making middle class landlords''.According to Tax Office figures, the proportion of taxpayers who own rental property has swelled from 6.5 per cent in 1989 to 13.5 per cent in 2009, two thirds of whom claim a loss on their investments.
Mr Minack, who has long been concerned over the level of debt in Australia, said 80 per cent of the owners of these loss-making properties earned below $80,000. He said this debunked the ''myth'' that most debt was held by high income earners who could withstand shocks to income.
The strategist said a long period of flat house prices could prompt swathes of property investors to sell out, driving down prices.
This represented a more imminent threat than a wave of job losses, which looks unlikely in the mining boom. But unlike other housing bears, he said any fall in prices was likely to be gradualthan sudden.
''Dodging the worst of the global financial crisis didn't demonstrate that there's no bubble. In my view it just showed that we dodged the prick,'' the note said. ''However, the risk of big price declines in the near-term seems low.''Mr Minack's view contrasts with many economists, who say house price increases reflect a shortage of supply amid surging demand.
The property boom has been especially pronounced in Melbourne, where the median house price has nearly doubled this decade. Sydney prices have risen more modestly, including a slump after 2004 before a surge last year.RP Data figures showed a slight fall in June after 17 months in a row of increases.
Collateral damage as they say!...what will happen to equities in aus when the bubble goes pop?
and what will that do to the au$....and unemployment numbers....and the fiscal deficit over there...
and who will bail out the big four....and what will it all mean for Noddylanders?
No Muzza it does not. You have to account for the wave of workers and families heading across the Tasman. Those remaining are more likely to double up in larger homes and subsist on benefits.
The commodity trade will not bring a return to 'bubble era' activity in Noddy...and the rural sector land value collapse...40% they say....brings an abrupt end to the idea that the wealth will head for town with the aged farmers. That flow has come to an end.
The decision by the govt to promise taxpayer support to Kiwibank...in effect to underwrite another residential property binge with cheap credit...is the pointer to a future crisis when the IMF say enuff of this bloody crap to the govt.
Even the PIs with stable tenants in place for the next 10 years, face a decline in real returns as the value of the Kiwi slides on the world market. Throw in the real prospect of rising rates and the Elephant of debt sitting on those up to their necks in debt....better to expect the govt to introduce rent controls in my opinion!
Last but not least...a swag of Mcmansions were built in the wrong places. We know what the future has in store for them.
It seems PIs are losing interest in buying - http://www.stuff.co.nz/business/personal-finance/4035562/Kiwis-lose-interest-in-investment-properties
What will that do to the demand for rentals?
Anyone thinking there will be a utopia at the end of the road, need only go read all the stuff on this link:
http://money.msn.co.nz/blog.aspx?blogentryid=493108&showcomments=true
If you look back at his finance company ratings around 2007/2008, they were pretty much spot on; they went belly up starting with the E's then D's and continued up the alphabet, unfortunately all the way to A.
Does this intense dislike by some for the generously proportioned one from Kapiti arise from buying finance company debs (like me, sigh), or is it from the vitriol he sometimes directs at the insurance/Money manager/Financial planner industry?
Right then....time for some advice to big Gerry....you awake there Gerry?...set up an SOE with instructions to plan for the export of containers of fresh water. Have the containers designed to match the existing sizes so that existing systems can be utilised at each end of the trade. Start with the water wasted down in Fiordland. Use standard container ships so that return cargo can be found. In emergencies NZ will be able to donate this resource but the primary goal is to earn export loot from a never ending resource.
There is no value to society from rising house prices. It is simply a wealth transfer to existing owners from potential buyers. Pumping up house prices creates no more wealth than the Reserve Bank printing an extra six zeros on every piece of currency.
Worse, by increasing the leverage in the household sector and financial system, it increases the financial risks in the economy, as the last ten years have demonstrated .
i'm glad things are going down price-wise and i very much doubt a major increase in rent will occur as market forces will dictate...eh, Wally!
Sadly it may be dream Rob as the govt has tipped its hand with the underwriting of Kiwibank's upcoming residential mortgage cheaper for longer splurge....oh it's coming alright. I suspect the Cabinet has opted to run with the secret policy of porking the bubble up to the election. Look for them to raise the welcome home to greater debt loans once again. Expect pleasant noises from the building sector...lots of back scratching activity. Hello everyone...are you enjoying your life in an unaffordable box?
It's not bloody rocket science, just common knowledge.....so why do we read this on a very very recent article at marketoracle uk........." The BoE governor wrote yet another full of excuses letter to the Chancellor, Alistair Darling as to why the Bank of England is failing in its primary objective of controlling inflation."..... http://www.marketoracle.co.uk/Article21973.html
Makes you wonder what sort of an education these people have had.....and spare a thought for
the Chancellor, George Osborne. !!!!!
Singapore private home sales surge in July
- Source: Xinhua
- [15:43 August 16 2010]
- Comments
Singapore private home sales soared in July as developers sold 1,544 private homes, a massive 82 percent jump from June's 847 units, local media reported on Monday.The official figures also show that developers launched 1,335 private homes in July, up from 1,010 units in June, local TV broadcaster Channel NewsAsia reported.The most expensive unit sold was "Boulevard Vue" at core city area Cuscaden Walk, where a unit was sold for 4,600 Singapore dollars (about $3,368) per square foot.
I think they have no choice. There is only one final destination for the crap churned out by the 'productive economy' - in, on or around housing.
You either export, or you facilitate housing to store the piles of crap.
There is another way - forced consumption. You have to spend x hours and/or x dollars per day/week consuming.
Three swipes before you get out - that sort of thing.
That would be a real step-change.
Wally - Dinna' fash yersel', there's a wee drappie awaitin' yer next passin' along the hie road.
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