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Top 10 at 10: China's 'Last Madness'; Goldman reputation 'in tatters'; Aussie housing boom; Dilbert
Here are my Top 10 links from around the Internet at 10 past 6 (!). I welcome your additions and comments below or please send suggestion for Tuesday’s Top 10 at 10 firstname.lastname@example.org My huge apologies for an obscenely late Top 10 at 10 today. I got swamped with a bunch of things. Unfortunately this was not a dream.
Asset-price bubbles inflated by a credit boom could derail the recovery of the world’s fastest-growing major economy, which expanded 11.9 percent in the first quarter from a year earlier. China’s cabinet, the State Council, announced higher mortgage rates and down-payment ratios for second homes on April 15 after property prices jumped by a record in March.
Investors “don’t realize how strong and resolute the political will is among top leaders to curb price gains,” Li said on Central Television. The market is having its “last madness” and speculation may dissipate in a year or 18 months on extra action by local authorities and an increased supply of low-price, so-called policy homes, Li said.
After five interest rate rises in seven months they wonder how auction clearance rates remained so high for so long, along with rising median house prices.
The clearance rate was at 71 per cent last October, and has averaged 71 per cent since then. Over the weekend, agents secured a 68 per cent auction clearance rate in Sydney, according to Australian Property Monitors.
The strength has occurred despite the absence of first-home buyers from the auction rooms and a softening on investor finance approvals over the past five months. ''It's a bit of a puzzle,'' said Macquarie Bank's senior economist, Brian Redican, who once worked at the Reserve Bank. ''You wonder how auction clearance rates remain very high along with house prices themselves.''
3. Boomtime in Melbourne - Natalie Puchalski at BusinessDay reports auction clearance rates in Melbourne over the weekend were 84%, the strongest in 7 years.
Though it's usually the weakest quarter, the first three months of 2010 were at their strongest since 2003, according to the REIV.
Melbourne's median house price dropped just 2 per cent to $524,500, while unit and apartment prices grew by 2 per cent to a record $450,000.
4. Closing window - KPMG has produced a report pointing out that New Zealand's agriculture sector faces hot competition from low cost producers in South America, Western China and Central Asia within 5 years, Jon Morgan reports at Stuff.
The KPMG Agribusiness Agenda report observes that these regions have the benefit of lower-cost land and labour and less complex regulatory regimes.
"In addition, they are traditionally closer to key markets, enabling them to deliver food to the customer at a significantly lower cost than a competing new farmer or grower in New Zealand could achieve," KPMG agribusiness chairman Ross Buckley said.
"This gives New Zealand companies a short buffer, maybe as little as five years, before low-cost regions are producing bulk commodity products in significant volumes and undercutting New Zealand's pricing in our traditional commodity markets."
5. Why would anyone work for a living - Welfare researcher Lindsay Mitchell points out on her blog that a sole parent, with two dependent children, renting in Auckland on the DPB could receive approximately NZ$580 per week after tax including Accommodation Supplement and other allowances. This is more than most other women could earn in a job.
The chart below tells the story. Click to see a bigger legible version.
The MSCI World Index, as well as U.S. and Asian equity gauges, are ripe for a “multi-month” correction after valuations soared, said Nader Naeimi, who helps oversee $90 billion for the Sydney-based mutual-funds manager. AMP Capital last week began moving to cash assets from equities, anticipating a decline in stocks, Naeimi said.
“The Goldman inquiries have triggered a fresh wave of anxiety for investors,” Naeimi said in an interview today. “Not only is the market worried who might be next, it’s anticipating tighter regulation of the banking sector. Given how over-bought stocks had become, this may be enough to trigger the sharp correction in the overall market that we’ve been expecting.”
7. 'Reputation in tatters' - Felix Salmon at Reuters reckons Goldman Sachs' reputation is in tatters.
It seems to me that Goldman owes its clients and the public a massive apology. Blankfein has already said that Goldman “participated in things that were clearly wrong and have reason to regret”; he should make it clear that Abacus falls into that category. Instead, he’s trying to brazen it out, and is saying that the SEC’s charges are “unfounded in fact”. That might make sense from the point of view of a legal strategy, but it doesn’t make sense if he’s trying to rescue what remains of his and his firm’s reputation.
8. Head shaking material - This is hard to believe and the timing is suspicious. The SEC has released a report exposing its failings in managing somehow not to prosecute Ponzi schemester (and Texan cricketing enthusiast) Allen Stanford. Here's the Reuters version.
SEC Inspector General David Kotz said on Friday that the Fort Worth, Texas office of the SEC conducted examinations of Stanford in 1997, 1998, 2002 and 2004, "concluding in each case that Stanford's CDs were likely a Ponzi scheme or a similar fraudulent scheme."
"The only significant difference in the Examination group's findings over the years was that the potential fraud grew exponentially from $250 million to $1.5 billion," Kotz found.
So how did this happen?
Kotz also found that the former head of enforcement in Fort Worth, Spencer Barasch, "played a significant role" in quashing investigations of Stanford and sought to represent him on three occasions after he left the SEC. In 2006, he did briefly represent Stanford before being informed by the SEC ethics office that it was improper to do so.
When asked why he was so insistent on representing Stanford, Barasch replied, "Every lawyer in Texas and beyond is going to get rich over this case. Okay? And I hated being on the sidelines," according to Kotz's report.
9. 'The moment' - Simon Johnson at The Baseline Scenario puts the SEC fraud charges against Goldman Sachs into historical context well.
We have waited long and patiently for our Ferdinand Pecora moment – a modern equivalent of the episode when a tough prosecutor from New York seized the imagination of the country in the early 1930s and, over a series of congressional hearings: laid bare the wrong-doings of Wall Street in simple and vivid terms that everyone could understand, and created the groundswell of public support necessary for comprehensive reregulation. On Friday, that moment finally arrived.
There is fraud at the heart of Wall Street, according to the Securities and Exchange Commission. Pecora took on National City Bank and J.P. Morgan (the younger); these were the supposedly untouchable titans of their day. The SEC is taking on Goldman Sachs; no firm is more powerful.
Pecora exposed the ways in which leading banks mistreated their customers – typically, retail investors. The SEC alleges, with credible detail, that Goldman essentially set up some trusting clients and deliberately misled them – to the tune of effectively transferring $1 billion from them to a particular unscrupulous investor.
Pecora had the drama of the congressional hearing room and used his skills as an interrogator to batter the bastions of Wall Street, day-after-day, with gruesome and convincing detail. We don’t know where and when, but the SEC action points in one direction only: Lloyd Blankfein (CEO of Goldman) in the witness box, while John Paulson (unindicted co-conspirator) waits in the on-deck circle.
Either Blankfein knew what was going on – and is therefore liable before the law – or he was clueless and therefore incompetent. Either way, the much vaunted risk management and control systems of Goldman, i.e., what is supposed to prevent this kind of thing from happening, are exposed to be what we have long here claimed: bunk
10. Totally irrelevant video - This is clever. Here's the plans for a Chinese bullet train that never actually stops but still picks up passengers...