Here are my Top 10 links from around the Internet at 10 to 1 pm, 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 Friday'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.
1. The problem in America - Stepping back from the Fed's financial action this morning, it's worth looking at the problems on the street (or in this case under the street) in America.
This Daily Mail piece on how 1,000 people live in the flood tunnels under the Strip in Las Vegas is an eye opener.
The symbolism is startling.
Flashy consumerism and spending fueled by debt above ground: destitution and squatting in the tunnels below ground.
HT My wife who spends far too much time reading the Daily Mail.
Deep beneath Vegas’s glittering lights lies a sinister labyrinth inhabited by poisonous spiders and a man nicknamed The Troll who wields an iron bar.
But astonishingly, the 200 miles of flood tunnels are also home to 1,000 people who eke out a living in the strip’s dark underbelly.
Some, like Steven and his girlfriend Kathryn, have furnished their home with considerable care - their 400sq ft 'bungalow' boasts a double bed, a wardrobe and even a bookshelf.
“The big issue for them was the substantial appreciation in the New Zealand dollar,” Key, former global head of foreign exchange at Merrill Lynch & Co. Inc, told reporters after the deal with Warner.
“That’s something that a lot of our exporters are struggling with.”
So if Key realises the currency is a major issue, why isn't he doing something about it?
It's not good enough to simply say it's hard and we can't do anything.
Nothing is not an option.
Or we can just wait to get beaten up.
At least Key did something to keep the Hobbit.
So let's do something to keep our currency from heading towards parity with the US dollar.
3. Here's what we should be doing - This is a great story from Juha Saarinen at NZHerald about a New Zealander who has made a fortune making and selling an iPhone game. Inspirational really.
Here's the longer version, which is really worth a read for anyone wanting to know what it takes to be an exporter in a mobile and clouded age. HT Rowan Simpson via Twitter.
A helicopter game created by New Zealand iPhone and iPad developer David Frampton has taken off. The latest version of Chopper 2 sells for US$2.99 and has performed well on the iTunes App Store charts.
Despite the low price, Frampton's one-man-band, Majic Jungle Software, is making good money out of Chopper. "The first iPhone version has sold over 350,000 and had well over a million downloads if you include the lite version," Frampton says.
4. 'Buying reasonably short' - 30 Year US Treasury bond yields actually rose quite sharply after the Fed's QE II announcement as investors realised a lot of the buying would be of shorter term bonds, Bloomberg reported.
The Treasury 30-year bond fell the most in almost two months after the New York Fed said in a separate statement that 86 percent of its purchases will target bonds coming due in 2 ½ to 10 years. “Only a small fraction of the buying will be beyond the 10-year note,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment
Management, which oversees $550 billion.
Assets will have an average duration of five to six years, and the central bank temporarily relaxed a 35 percent per-issue limit on its securities holdings “to provide operational flexibility” and buy the “most attractive securities on a relative-value basis,” the New York Fed said.
5. The curious May Wang - The NZHerald's Kelly Gregor reports that May Wang and UBNZ are already receiving revenues from Fonterra but aren't declaring them to the IRD...
And it seems she has received money from 'friends and associates' that she doesn't want to disclose.
Oh dear.
No wonder the Serious Fraud Office is investigating.
Wang is seeking court approval to pay her creditors 6.5c in the dollar, but the IRD wants her bankrupted over a $1.3 million debt it is owed. Today, Wang's lawyer Paul Sills will cross-examine his client on her tax dealings. Wang said Natural Dairy's proposed sale and purchase of a dozen Crafar farms would fall over if she was bankrupted. UBNZ Asset Holdings already owns four Crafar farms it bought this year.
Natural Dairy owns 20 per cent of UBNZ.Wang has been given $500,000 in future earnings from UBNZ and $800,000 from "friends and associates" for the creditors' proposal. She would not openly disclose where the $800,000 had come from, saying she promised those people anonymity due to the intense public interest and media scrutiny on her, UBNZ and Natural Dairy.
6. Aussie govt vs Aussie banks - The Australian government continues to vent its spleen at Commonwealth Bank of Australia's decision to lift its floating mortgage rate by 45 basis points in the wake of the Reserve Bank of Australia's 25 basis point hike.
Ralph Norris may have his head down but all the Aussie banks are copping it.
The drum is beating for more regulation across the Tasman.
Here's The Australian reporting on comments from Treasurer Wayne Swan.
WAYNE Swan wants to include backing for the mortgage bond market and a new safety net to replace bank deposit guarantees. These will be in the Treasurer's plan to force more competition into the banking sector.
Taking an aggressive stance before heading to Beijing, Mr Swan yesterday warned the nation's big four banks that they should not underestimate his determination to push through changes designed to discipline them and assist their competitors.
"It will put pressure on the major banks to behave in a better way and to ensure that their competitors can provide the fierce competition which existed prior to the global financial crisis," Mr Swan said.
The Treasurer said the crisis had weakened smaller institutions and the challenge was to provide them with a source of cheaper funding. "We do live in a society where we do not directly regulate interest rates, so what the government will do in response to this very arrogant action from the Commonwealth Bank is put in place a further raft of reforms that empower consumers and make sure we get the most competitive outcomes, and that's what we're going to do," Mr Swan said.
7. 'I'm calling your bluff' - Tim Colebatch at The Age reckons Norris may be calling the Australian Government's bluff with some success.
The only real threat to the Australian banks is some Aussie version of KiwiBank. That's possible with former NAB banker Ahmad Fahour appointed recently as the CEO of Australian Post, but not yet. Danny John at BusinessDay thinks Fahour might have a go. We'll see.
Here's Colebatch on that bluff.
Norris has bet that, in the end, their bank-bashing will be mostly talk, little action. And he is probably right.
The big four are now a firm oligopoly, controlling 87 per cent of housing loans. Since the mid-90s, our competition regulators have allowed them to gobble up their main rivals, and the global financial crisis saw off the rest.
Joe Hockey's nine-point plan has some good elements - such as a new financial system inquiry - but let's be frank: their impact would be marginal.
There's only one way to create serious competition to such a strong cartel: do what prime minister Andrew Fisher did in 1911, when he set up the Commonwealth Bank as a government-owned competitor. Our politicians won't do that.
8. Even Iran is buying gold - Saudi Arabia recently announced it had doubled its gold holdings to 323 tonnes.
Now Iran is quietly increasing its stockpile of the precious metal in case the US dollar implodes under the weight of all this paper being printed right now, the Mehr News Agency reports.
“Provided that the World Bank statistics are true any country with this amount of reserves would never hit a dead end, ISNA news agency quoted Bahmani as saying.
“It may be possible to exert pressure on a small country with $4-5 billion reserves, but the situation in regard to Iran is different, he said in a reference to efforts by Western countries pressure Iran financially.
9. A financial joke - HT Alex's Grandfather for this joke at the expense of Royal Bank of Scotland (and the British taxpayer...)
The Banking Crisis simply explained...
Young Paddy bought a donkey from a farmer for £100.
The farmer agreed to deliver the donkey the next day...
The next day he drove up and said, 'Sorry son, but I have some bad news. The donkey died!
Paddy replied, 'Well then just give me my money back.'
The farmer said, 'Can't do that. I've already spent it.'
Paddy said, 'OK, then, just bring me the dead donkey.'
The farmer asked, 'What are you going to do with him?'
Paddy said, 'I'm going to raffle him off.'
The farmer said, 'You can't raffle a dead donkey!'
Paddy said, 'Sure I can. Watch me. I just won't tell anybody he's dead.'
A month later, the farmer met up with Paddy and asked, 'What happened with the donkey?
Paddy said, 'I raffled him off.
I sold 500 tickets at two pounds a piece and made a profit of £898'
The farmer said, 'Didn't anyone complain?'
Paddy said, 'Just the guy who won.
So I gave him his two pounds back.'
Paddy now works for the Royal Bank of Scotland .
10. Totally relevant video - Jon Stewart does his thing on the mid-term election results. 'Maybe we can't.'
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Indecision 2010 - Maybe We Can't - Election Results | ||||
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41 Comments
Here's the FT on what happens next after QE II
http://edition.cnn.com/2010/BUSINESS/11/03/emerging.market.money.flood…
According to a research note published by HSBC on Tuesday, one of the unintended consequences of loose monetary policy in the US and Europe is the likely proliferation of capital controls across the developing world. Emerging markets are struggling with what it calls the "impossible trinity", an inability to allow free flows of capital while simultaneously maintaining a grip over interest rates and exchange rates. "The more the west pursues quantitative easing, the more the emerging world, via capital controls, will pursue quantitative tightening," it said.
In Asia, following Brazil's reintroduction of taxes on capital inflows, Thailand was the first out of the blocks. Last month, it imposed a 15 per cent withholding tax on capital gains and interest payments for government and state-owned company bonds as a way of discouraging inflows. On the other side of the ledger, it has removed limits on overseas investment and eased restrictions on lending to foreign borrowers in an effort to encourage outflows by domestic investors.
Whatever the causes of upward pressure on exchange rates and inflation in emerging markets, Mr Yetsenga said, capital controls had "definitely become less taboo" as a countermeasure. Even the International Monetary Fund had dropped its strong objections, he said.
In an interview with the Financial Times last week, Lee Myung-bak, president of South Korea, said policies aimed at stemming excessive capital flows should be considered within the framework of international co-operation. Each country had to "take into account their own domestic needs", he said, rejecting the suggestion that unilateral action could be regarded as undermining collective action to rebalance the global economy and avoid a currency war.
cheers
Bernard
Here's a nice twist. The Australian Bankers Association is arguing banks need the flexibility to generate larger profits to ensure foreign concerns about their exposure to Australia's over valued housing market don't become self-fulfilling concerns...
Oh the irony...
http://www.smh.com.au/business/house-bubble-risks-behind-rate-moves-aba…
The Australian Bankers' Association, the industry's main lobby group, today attributed worries about Australian house prices on overseas markets as part of the reason for any extra rate hikes by its members.
“Over the last few weeks, we've had a lot of international investors asking very detailed and probing questions about why it is Australia thinks it doesn't have a housing bubble,” said ABA's chief Steven Munchenberg.
"Bankers were grilled at length as to why investors should not be worried Australia has a housing bubble,” he said. Australia's banks remain “very conscious of the risks of international investors becoming nervous about investing in Australia. “
cheers
Bernard
This is a truly weird story about a member of the House of Lords seriously saying in Parliament that a mystery foundation X tried to buy the British Government...
Hard to believe, but FTAlphaville confirms Lord David James of Blackheath actually said it in parliament
http://ftalphaville.ft.com/blog/2010/11/03/392971/the-parliamentary-foundation-x-files/
And here's Felix Salmon from Reuters on the same story...
http://blogs.reuters.com/felix-salmon/2010/11/03/conspiracy-theory-of-the-day-foundation-x-edition/
Lord James always struck me as a perfectly sensible person, but he does seem to have gone completely bonkers here. But hey, at least he’s provided years’ worth of grist for conspiracy theorists around the world. Who could this Foundation X be? Might they be related to the Rosicrucians? The Knights Templar? The Illuminati Elite? The Vatican? And what terrible fate might befall James, now that he has hinted at their shadowy existence?
It turns out Foundation X seems to be a scap company called OITC that swindled US$20,000 from a mayor in Ecuador.
Here's Felix's final word...
Any sensible person would recognize OITC as a scam after spending about two seconds on its website. Which says to me that David James is, sadly, no longer a sensible person. He’s had a long and noble and storied career; someone should let him retire with dignity at this point.
cheers
Bernard
@#2
Not sure if there is much that can be done about the NZD rising right now. In fact, it’s not about how strong the NZD as it is more about how cheap the USD is. Sure, we could print our way to a cheaper currency, but since 99.99% of all commodities on the planet are traded in USD we will be forced to pay the inflation tax on the back end. So our exports might be more “competitive” but now were spending $20 for a loaf of bread.
Better to sit tight on this one and allow the NZD to rise. Besides exporters should be responsibly hedging against a rising kiwi. If they are not…shame on them. the days of the $0.50 NZD are over and not returning. If anything we need to start looking at the very real possibility of parity.
UK house prices are set to crash again, it seems. HT Tristan via email.
http://www.mortgagerates.org.uk/news/house-price-cras/
Ed Stansfield, chief property economist at Capital Economics, said: “The fact that house prices now appear to be on their way back down after the past year’s rather unexpected surge should not be a surprise. Not only is the market overvalued on most measures, but house price falls are entirely consistent with the drop in buyer inquires and mortgage approvals that we have seen in recent months. They also square with reports that lenders have begun to tighten credit standards again.”
cheers
Bernard
Is Silver undervalued relative to Gold? Casey Research thinks so
The silver/gold ratio is currently about 63:1, yet the total value of all the investable gold on the planet is about 235 times that of silver.
For the record, the ratio of silver to gold in the earth’s crust is 17:1. That’s in the ballpark of the 15:1 average silver/gold price ratio that has held sway over the centuries.
http://www.zerohedge.com/article/guest-post-more-case-silver
cheers
Bernard
5. The curious May Wang - The NZHerald's Kelly Gregor reports that May Wang and UBNZ are already receiving revenues from Fonterra but aren't declaring them to the IRD...
And it seems she has received money from 'friends and associates' that she doesn't want to disclose.
Oh dear.
No wonder the Serious Fraud Office is investigating.
And I’m very surprised that Bill Ralston and the Editor of the Royal New Zealand Herald hasn’t stormed out to condemn this investigation as a blatant piece of scurrilous racism. We all know that this has nothing whatsoever to do with Ms Wang’s honesty and everything to do with the fact that she’s Chinese! It’s outrageous!
Yes Bernard : You are losing your sensibilities and moving across into the bonkers zone ! Just because John Key recognized that there is a currency problem , you demand that he do something about it ............Dude , you are barking mad ! Doing nothing is an option .
Little old NZ will just have to learn to live with a high dollar . The bigger players in the currency markets will rob us blind if we attempt any currency controls .
Life just ain't fair . .......... Big surprise there .............. Not !
Agreed
Just imagine if Obama did nothing. The US would have probably recovered by now and less $6 trillion in debt. Instead he decided to intervene monetarily and do nothing to punish those that are clearly guilty of the greatest transfer of wealth EVAR!
Then again the Democratic Party never missed an opportunity to miss an opportunity!
Yup ! Imagine if all those " too-big-to-fail " banks had to file for chapter 11 bankruptcy protection , instead of being bailed out . The board of directors would've been held to accounts , by the juducial system . The bond-holders would've been wiped out . And all salary and bonus packages to executives would've been invalid , and open to re-negotiation .
Pity that Paulson/Geithner were too stupid ( or too deeply in the pockets of the major players ) to do this .
The outcome now is to burden the populance with debt , and a future inflation hike . To stomp all over the myriad of smaller banks , who did no wrong . And to bail out the miscreants .
And has the government guarantee in NZ been any different to the shamozzle in America !
[ Don Brash is correct : Central planning is an abject failure . We need to move away from government controls , and increase privatisation of the financial markets .......... Scrap the Reverse Bank ............. Break the Finance Minister's sticky fingers ]
Quite right, TrevorS. Which is why I still ( although starting to waiver!) see the OCR at...0%...as the high currency knackers our exporters, what's left of them, and our economy grinds to a complete stop; except for the overseas borrowings, of course, to pay for the cheaper imports.....
Bernard: Flashy consumerism and spending fueled by debt above ground: destitution and squatting in the tunnels below ground.
If you had made it to the end you would have found the reason why: Most of the people who live underground have fallen into destitution after struggling with drink, drugs or mental health problems.
Berend
No worries. Healthy society then.... ;)
We are social animals. These things are symptoms of systemic failure.
Brutally unequal societies are unhealthy ones.
Something is rotten at the heart of America. The last couple of years has laid that bare.
This is one but one example.
cheers
Bernard
Bernard,
Is there no correlation between this phenomenon and the unaffordable housing that is a consequence of government regulation?
It is a fact that even BEFORE the crash, in cities in the USA where there were no limits to fringe development, it was possible to buy an old dump of a home for $40,000. Before anyone sneers at the "old dump", let me point out that the difference between regions is the price of the old dump, not its quality - the SAME HOME in "Smart Growth" jurisdictions would be $300,000 plus - including right here in NZ.
Economists like Hernando DeSoto and Alain Bertaud have written plenty about the connection between "informal housing" in third world countries, and the regulatory COST BARRIER to entry to the "legitimate" housing market. What is happening is that first world countries seem to be hell bent on regulating THEMselves BACK into the third world's problems.
TATA Housing in India, is doing small apartments in 3 storey blocks for US$10,000 each. There is actually no reason beyond political ones, that this could not be done here, or in any region in the USA.
In NON Smart Growth cities in the USA, even the worst losers at least still live in houses, not drains.
What is doing something:
To be fair I think Bernard is suggesting a Singapore model of currency control for the NZD. However, I don’t think that wouldn’t have worked. Why? Because a major component that any index the NZD was pegged too would have had the AUD in it. And now since the AUD is at parity the NZD would have been even worse off for exporter then it is now. Besides how do you determine the true value of the NZD outside the market? I think it’s worth $0.85-$0.90. But I’m sure "Hamish the farmer" wished it was back to the good ‘ol days of $0.50
I would rather have the market determine the price of the NZD then some priest class of sages pegging the NZD to some fiction index. But if they do I want to christen the new index the “Unicorn Index”.
FYI May Wang's own lawyer drove her to tears in court today...
Apparently she is broke...
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=106…
cheers
Bernard
The remaining $100,000 will be used to live off, she said.
It never fails to amaze me .... the more destitute, broke and up to their eyeballs in it ... the more this type of person(s) think they deserve to maintain an extravagant lifestyle.
Does this person have citizenship and/or permanent residency?
If so, I predict we'll be paying her the unemployment benefit in another year - or perhaps the sickness benefit, as she'll have a nervous breakdown.
I thought the comedy show left town when WB returned to LA.
Got that wrong Kate, here in Wellington the comedy show just doesn't stop:
http://www.stuff.co.nz/national/politics/4310565/Clumsy-full-stop-to-hosting-a-world-power
And then the collapse came and I was so pleased to have ten kilo of gold hidden away...I didn't have any cash mind but no worries...just sell it back to the NZ Mint....then I discovered they took their orders from the stonecutters and the buy price was falling 5% a week. Haha.
The RBNZ has a table of the daily exchange rates back to 1973
http://www.rbnz.govt.nz/statistics/exandint/b1/index.html
The TWI for the 4 Nov for each yr from 2004 are:
68.1, 70.9, 67.0, 70.8, 60.0, 65.1, 69.1
The index has been around the same level (except for the dip in 2008 at the hight of the crisis)
'2025 Taskforce again long on diagnosis, short on therapy'
We would like to have seen more on how the 2025 Taskforce thinks the gap with Australia could be closed say the New Zealand Manufacturers and Exporters Association (NZMEA). The report focused heavily on reducing public spending, fine as far as it goes, but there was little detail on important issues such as tax balance, monetary policy and innovation.
NZMEA Chief Executive John Walley says, “The level of Government spending is important in determining the balance of the economy, but it is naive to think that cost cutting alone is going to turn things around.”
“The Taskforce’s recommendations largely echo the Washington Consensus. This approach has not seen substantial export growth from the countries that have applied it. Earlier this year the International Monetary Fund recommended more pragmatism on exchange rates from small economies instead.”
“The tax balance was hotly contested in the Tax Working Group’s report with a Land Tax being one option and Don Brash has mentioned before that a variable excise tax could be used to control inflation; the Taskforce needs to weigh in on these issues. If they cannot agree on an approach, they could at least present some fresh options.”
“We are all well aware of the increasing wealth gap between New Zealand and Australia and what will happen if the matter is not dealt with,” says Mr Walley. “What the Taskforce needs to deliver is new thinking and debate to turn this around.”
http://www.realeconomy.co.nz/128-2025_taskforce_again_long_on_d.aspx
Yep, same ole, same ole. Time to forget being ideological and pure, and get pragmatic, quick like. What a waste of time and tax dollars.
Cheers, Les.
It looks like Ireland may be about to go pop:
Look at this genius,
The New Zealand dollar will "blow through" US80c by the end of the year, pushed along by the United States Federal Reserve decision to pump money into the economy and strong commodity prices, Bank of New Zealand chief economist Tony Alexander says.
and this morning the $ is at .7955
I wish I could get paid to make predictions like that,meanwhile back on the farm its looking ugly as the $ takes the fat away and leaves us with bones.
0.7955
0.0155
1.99%
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