Word in cnbc at dawn today was the market is betting 100% that the FED will lift rates by the start of 2010 and the 10yrs are over 3.8% and rising. No data sign of inflation showing up but then it always lags right? So will Bollies be able to sit at 2.5% through to the end of 2010, not a chance. Meanwhile the perk rort scandal is leaving a really awful stench over the whole of Parliament and the Beehive. Seems the odour just won't go away. Unemployment rising faster than the spin doctors said it would. They will be hard at work this weekend scripting a new load of BS about greenshoots.

Isn't that nice of Lockwood, he's dead keen on protecting the spouses of travelling MPs from feeling guilty at being able to trot off with their partner mps on any trips anywhere anytime no matter how frequently nor how far and certainly not for how long all at the expence of the Taxpayer. How nice of you Lockwood. What a bloody shame you fail to show any empathy for the Kiwi families having to pay for these holidays, and holidays they certainly are. Is this common policy in the SOEs as well? How about in the corporate world? We need an end to these perk travel trips and then the spouses will be able to feel no worries at all, RIGHT Lockwood?

"Mr Schiff" : wild guesses, speculation, gambling nothing more....for oil to rise economies have to recover....the financial side of the economies has been mass injected with $ til its coming out of their ears...meantime the real economy is in tatters...it may even be dropping...so will oil rise to $100?......based on a not recovering world real economy, no, not for a year, maybe two. All else being equal....and thats the crunch line, there are so many interactions that might cancel each other out, turn negative or multiply....

So other major issues effecting oil price, From what I can see there is no oil shortage so it should not rise due to lack of demand for 12~18months, not to $100 anyway....some say we have 6mbpd excess, I think its more like 1~2mbpd....so with that buffer oil isnt going up that buffer has to go first. All else being equal.

Can the USD tank? pushing up the oil price? yes it can....it could tank seriously...that would take it above $85 or so they say....trouble is when that happens the headless chickens all run back to the USD, buying it, so it could be self correcting if volitile.

Can OPEC cut production again? yes, quite possibly and that would send oil up a bit....Trouble is that may be the thing that plunges the US/World into a "real" depression...OPEC has to be aware that the global economy is fragile, its all very well wanting $100...but kill the golden goose which is the developed world's recovering and it will be $35 again....

So to say $100 you must have a model that can take all these variables and churn out a number with relliability....quite simply I dont believe you.

"Interest rates creep back toward 10% and inflation skyrockets" Its possible, if we get inflation....many seem to think deflation is still as big a possibilty as [hyper-]inflation...so within 5 years 10%+, yes its possible....All else being equal...however the key is the response the RB has to a failing/failed economy, ie one still in recession in 2~5 years time and where it puts the OCR.....if they follow the japanese model it will be <1% for a decade if not two....ie rising interest rates is only going to occur if we come out of a recession, quickly and hotly....I dont think we will....I think its a decade of crawling...aka Japan.....in which case staying floating makes sense which is what I have done, though if I think we are really going to come out I'll jump on....probably for 2 years....

Phase2 of the bear market? yes watch the US in the late Fall....prime and commercial failures from now to this time next year...Xmas or just after for US commercial prop collapsing....In which case the money flees to the USD which is like jumping on the titanic IMHO...

Fontera reported milke solids up, oil is up, most US companies are toast so all the $ injected into the banks has to go chasing something, that seems to be non-US commodities..............

So to sum up, its a mess with the stupids left with large wads of cash to gamble with for free.....who knows where we will be in 3 months, let alone 6....

Steven's question is spot on. The US, UK, etc governments have injected huge amounts of money which we are led to believe is just sitting on the bank balance sheets. Perhaps the free money is starting to pour into commodities and equities again, regardless of the health of the "real" economy.

This looks like the first test of the consumer deposit guarantee. Who wants to be a crash dummy?

He didnt make this money from Dairy farming

Last year Hubbard took out a $150 million mortgage with ANZ on five rural properties he and his wife Margaret own, to buy more of them.

And it says something about the depth of his pockets that most of that money had already been repaid.

"It [the loan] is only around $35m at the moment," he said.

The land value of dairy land is officially %25 below 2006 valuation

Apart from Southbury's stake in Dairy Holdings, the Hubbards have stakes in 22 substantial rural properties with a combined land area of just over 14,000ha.

They own 100% of seven of these properties (1565ha) and partial stakes ranging from 23% to 75% in the others.
Most of these have a single mortgage to one or other of the major banks, but a couple have second mortgages to SCF.

Other directors being?? (interesting) Second mortgages are worth(less)

Moonshine Farms, an 829ha Canterbury property in which the Hubbards are listed as the largest shareholders with a 38% stake, has a second mortgage to SCF securing up to $15m. The security for this loan was increased from $3.84m in January last year.

The first mortgage, securing up to $6.75m, is to ANZ.
Hubbard said Moonshine had borrowed money from SCF because it needed additional working capital but had been unable to secure this from its bank. This loan had since been fully repaid, but the security was left in place in case more money was needed in the future.

Because the farm was involved in a dispute about water rights, the property's first mortgagee, ASB, was not prepared to advance any more money, so SCF stepped into the breach to allow the transaction to be settled.

Not good enough for the ASB Ha!

This raises more questions than it answers.

A month or so back, someone within the dairy industry presented long term statistics on dairy farm profitability. " Feast or Famine " would describe the returns. Fair enough for family enterprises with low debt, and a passion for the style of life. But not so flash for all the " Johnnie come latelies " looking for a quick buck. As a business model it doesn't provide a consistentcy of returns. And as such, banks can be excused for higher mortgage rates, as the default risk is high................Anyone care to nominate the next bubble to form in the primary sector................Trees have been down for a while, how about we all bale into forestry, next !

but with the exception of dairy do these really touch the eighties sharemarket

marcf
Good point.Id forgotten about the sharemarket. What if we stick everything together except dairy and call it equal to the 87 crash. Remember the Sharemarket recovered we will wait along time to see ostriches come back. Even Hawkins came back for a second bite.

I like Bonners take on economists;

At least something good has come out of the economic crisis; it blew off the purple robes that clothed economists and exposed their naked flanks. Still, they don't deserve the beating they're getting in the press - with snide remarks and sarcastic comments; they deserve better. A beating with sticks!

Even Alan Greenspan admitted he had "found a flaw" in his own thinking. We will have to imagine the giggles from the back of the room - if anyone had been awake. If was as if Stalin had confessed to being rude to his mother or Bernie Madoff copped a plea for shoplifting. The mea was fine, but the culpa didn't seem to measure up to the facts. He, more than any living human being, was responsible for the biggest financial debacle in history; you'd hope he'd be a gentleman about it and hang himself.

Meanwhile, the queen of England visited the London School of Economics and had a question: why weren't economists on top of this thing?

They replied to this question last month. In a three-page letter, they avoided the simple truth - that their trade was no more reliable than fortune telling and marriage counseling. The letter claimed that a "psychology of denial" prevented government and financial eyes from seeing the catastrophe in front of them. It was "a failure of the collective imagination of many bright people", they said. In fact, it was the exact opposite - imagination run wild. Economists imagined a world without yesterday or tomorrow...a world in which you could run up debts forever and never have to pay them back.

Last week, Timothy Geithner promised the Chinese that the US economy would recover thanks to demand from the private sector. That was his way of reassuring America's biggest creditor that the public sector wouldn't continue to run huge deficits - practically an outright lie. But it's one thing to stiff the Chinese; it's another to stiff time.

Adjusted for inflation, the US consumer's earnings barely rose from the '70s. By some measures, he had actually less disposable spending power in 2007 than he had in 1973. And now his income is going down. The June number reflected the biggest drop in income in 4 years. Salaries and wages fell 0.4% in June...the 9th drop in the last 10 months. How is it possible for him to spend more?

We pose the familiar question only to set up an unfamiliar answer. In the past, the consumer reached into the future. In many cases, he reached beyond the future, and into Never Never Land. Consumers spent money they hadn't earned yet...thus bringing forward purchases that should have been made years later. The accumulated effect of this was to add $35 trillion in extra spending to the world economy - from America alone - over the course of the great credit expansion, 1945- 2007. That's why we have a depression now - because consumers already spent what they would normally be spending now.

Time always gets even. Now, it is the past that is doing the reaching. The automobile bought in 2006...the house bought in 2005...the vacation taken in 1999 - the ghosts of yesteryear spending reach for Americans' paychecks. Of course, in some cases, consumers spent more than they could reasonably expect to pay back - ever. They reached so far the poor ghosts are disappointed. Lenders realized that they'd never get their money back, which is what led to the credit crunch and the collapse of Wall Street. Of the big five - Bear, Lehman, Goldman, JPMorgan and Merrill - only two survived intact. And we know now that Goldman only survived because Henry Paulson, former CEO of Goldman, then Treasury Secretary, arranged a hidden bailout. He had the government step in to save AIG, which owed Goldman $13 billion.

From one scam to another...from bailing out Wall Street to bailing out the entire world economy, the more stimulus programs fail to bring a recovery, the more economists call for more stimulus.

What are they thinking? Since neither the private sector nor the public sector has any savings from the past, additional demand from either sector must be borrowed from the future. (Setting aside 'quantitative easing'...or Zimbabwe-style stimulus...an even bigger fraud.)

The purest illustration of how this works is in the popular 'cash for clunkers' programs. Instead, of letting the consumer buy a new car when he is ready, the feds give them money to buy now. So, he buys in 2009 and not in 2010. What good is accomplished? It is as if they didn't expect 2010 to ever arrive...as if they thought they could stop the sun and the seasons...and the Chinese...forever. Like moths in amber, their wings will never tatter...nor will their faith flag. The dollar will always be strong. US bonds will always be in demand. And the future will never arrive.

But the more economists try to stitch up the future; the more it gets away from them. After the 2010 sales have been moved forward to 2009, they will have to reach into 2011...and then 2012...all the way to the end of time.

Bonner's wrong about economists:

At least something good has come out of the economic crisis; it blew off the purple robes that clothed economists and exposed their naked flanks. Still, they don't deserve the beating they're getting in the press - with snide remarks and sarcastic comments; they deserve better. A beating with sticks!

We don't want them to become martyrs. Economists need constant attention to prosper. If we simply ignore them and their forecasts they become impotent (and we make better decisions). Then you start asking them to explain their models, or tracking their projections against outcomes. Rank their success against tossing a coin.

With policies that favour the internal non-traded sector and transfer wealth from the productive economy to the non-traded economy via an overvalued and volatile exchange rate really hits farming. Farming, with most of its costs in $NZ, is harder hit than manufacturers, who at least have some natural hedge on offshore sourced materials.

The only aid to farming is the CGT exemption, fine while the bubble is inflating, but a bit of a crock right now and for while to come. How would you like to be a geared (to bank recommendations two years ago) 63 year old farmer with no family plan to transfer ownership?

You have been advised / encouraged to farm capital gain all your life and are ready to cash out now, but....

Steven.

I doubt that 'something that is going to give them a return' is yet NZ dairying. You only have to look at the movement of New Zealand farmers to other countries (PGGW included) to get our own perspective. Have you compared agricultural land prices between countries? NZ stands out, as ... ???