Here's my summary of the key events overnight that affect New Zealand, with news of renewed focus on bank sales cultures.
But first, the flash durable goods orders report for the US for August has come in better than expected. A decline from July was expected but in the end the data level-pegged the previous month. There were revisions to the July data however, generally marginally lower.
Bank culture, especially around sales targets and bonuses, is in the spotlight again. The Wells Fargo bank board has stripped its CEO's and another senior manager of their unvested equity awards worth more than NZ$50 mln and said they will not pay their salary while they investigate the bank's sales practices which have brought major reputational damage to their bank. They have lost their 2016 bonus as well.
This action comes days before the CEOs of the big four Australian banks appear before the Economics Committee to face questions about their own sales and bonus cultures. Wells Fargo's actions will embolden the Australian parliamentary inquisitors.
And a key US regulator has asked American banks to be careful about blanket cut-offs when they take actions to de-risk themselves under anti money laundering rules. The regulator is concerned about the impact on entire groups of customers or counties in riskier parts of the world, and said he will issue guidance on how this is to be approached.
In Germany, there are real concerns about the viability of their biggest bank, Deutsche Bank. The bank is fighting a fine of up to NZ$20 bln from the American Department of Justice and the size of the punishment is raising concerns over its capital adequacy. The weekly German paper Die Zeit reported that the German government is working on a bailout plan that might include them taking a 25% stake. But denials have been loud today - so loud, it might actually be true.
In China, their Golden Week holiday is about to start, and this involves the movement of enormous numbers of people. Just on their railways, they are expected to shift more than 110 million people, with more than 15 million on Saturday alone. Trips by car, bus and air are additional.
In Australia, the entire state of South Australia was without power for several hours yesterday afternoon, with the region hit one of the most extreme weather systems for 50 years. A mass blackout began about 3.30pm local time, plunging the Adelaide into darkness, grounding flights and causing havoc on the state's roads.
In New York the UST 10yr yield has fallen again today to 1.55%.
The US benchmark oil price is up $1 today, now just under US$46 a barrel, while the Brent benchmark is now just on US$47.50 a barrel.
The gold price has slipped slightly again, now at US$1,326/oz.
The New Zealand dollar is lower today than at this time yesterday by about ½ cent, now at 72.5 US¢, and on the cross rates it is at 94.7 AU¢, and 64.7 euro cents. The TWI-5 index is now at 75.5.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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29 Comments
Great article this morning in the Waikato Times with the headline
WHY CHINESE WIN REAL ESTATE GAME.
It then lists some reasons eg
no heading off to Europe for holidays
no drinking Saturday nights
working 7 days a week
buy anywhere even less deirable areas,
and no buying boats,utes etc.
I would paste it or poste it but i am technically deficient in that area.
Guess what, a few years back NZers did all those fun things and still bought themselves a house, all this is doing is confirming that people have to do more and more for less and less.
Our culture is also not to hot house/tiger parent our kids (oh please, let us not think we have to do that to them to compete) our culture is to live in smaller numbers in one dwelling (are we going to have to cram many more in to make ends meet)
While not going OTT on the pleasure side of life, giving it up altogether should not be a requirement in order to house oneself.
Next generation of Chinese born here, will not be so keen to follow in their parents' footsteps.
And why shouldn't people do an OE after all the Chinese that come here are doing one. OEs are not going to be the big thing they were a few years ago anyway, they can't even afford that.
The Chinese have an extreme attitude to housing investment/ownership that is beyond anything the world has ever seen. The supreme mania award goes to Shenzhen with a house to income ratio of 75 times. That's right you would need to work for 75 years and put every penny into a roof over your head - no food. That is so far beyond ridiculous but this is the attitude that is causing problems for us and elsewhere. If we are prepared - as our current government appear to be - to engage in this game, welcome it even, then goodness knows what could happen. You are dealing with a full blown mania; good luck if you think skipping the flash coffee or winter trip to Fiji is going to help.
https://www.youtube.com/watch?v=31BEQdu3cus
Personally, I don't think 'median multiples' (or any multiples) are terribly relevant, then or now. What is relevant is how much of take-home pay I spent sevicing the mortgage(s). Allows fair comparison across generations, countries, age groups, etc. And I can tell you it was [much] more than 40%, so 'seriously unaffordable' back then. Consequence was, going without other stuff for a long time.
That would be this one : Stuff.co.nz - Chinese buy property, not holidays.
An observation posted re Deutsche Bank ...
"Lehman brothers: $639 billion in assets and $619 billion in debt.
Deutsche Bank: assets of 1.64 trillion euros (yes, trillion) and liabilities of 1.58 trillion euros. Plus global derivatives risk in the range of $75 trillion. Deutsche is the 11th largest bank in the world, when (not if) it goes bankrupt, the cascade of events will likely destroy the world economy within weeks. It is hard to see how we could have banks, any banks, or any kind of a financial system, three or four months after Deutsche goes down."
I know that doomsterism is soooo Now.
David Goldman, ex-director of Credit Suisse and who therefore can be assumed to have better than average competence, does not regard the prospect of DB circling the bowl as cause for donning the 'End is Nigh' sandwich board....
http://atimes.com/2016/09/deutsche-banks-problem-doesnt-mean-a-broader-…
I had seen that. I cant comment on whether a banker is of above average competence, but are statements like this really meant to inspire confidence?
"There may be nothing nefarious in Deutsche’s off-balance sheet exposure, to be sure. We simply don’t know."
To dismiss these wee non events as trendy doomerism is to not understand where we are truely at.
these may help....
https://www.youtube.com/watch?v=TFyTSiCXWEE
https://www.youtube.com/watch?v=-EMlDuNH59c
Interesting property deal gone bad in today's Pravda. Foreigner trying to back out of a deal using the excuse that she doesn't speak English.Judge seems to acknowledge that a lack of English could be used as a challenge (this seems very odd????) but she failed in his eyes due to actually being quite a linguist after all.
How can not speaking English be used to try and negate a property deal or do foreigners get special consideration???. It was for more than $7,000,000 after all so you would think some professional help would be used or is that just confetti to Asians?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=117…
"The company argued it shouldn't have to pay the $730,000 deposit and that the purchase agreement was void because its director didn't understand English.
But a High Court judge was satisfied that the director, Helen Liang, is "much better at English than she has let on" and found in the seller's favour over the $730,000 deposit."
Lay odds the vendors won't get their $730,000
Liang will appeal - lose again - liquidate the company - go bankrupt - then phoenix it
Doing a $7 million deal in NZ, an English speaking country, and then pulling "don't speak english" card is dishonest, but to then tie up our court system to pursue her dispute is arrogant
Federal Reserve Chair Janet Yellen told lawmakers that the U.S. will continue to add jobs at a solid rate, though the recent average pace is probably higher than what’s sustainable over the long term and would eventually cause the economy to overheat.
The current course of the economy calls for a gradual increase in interest rates, something that doesn’t have a fixed timetable, Yellen said Wednesday, speaking before the House Financial Services Committee in an appearance focused mainly on regulation. “If we allow the economy to overheat, we could be faced with having to raise interest rates more rapidly than we would want,” she said. Read more
Yeah right!!! - the US Treasury market says no chance.
Again, it really isn’t that complicated but it is made so by orthodox econometrics that holds a very skewed view of the world and how all these things work. Economists would rather rely on very dubious reconstructions than admit to the simplicity. Read more
This could be the story of the day...
Congress overwhelmingly voted to override President Barack Obama’s veto of the bill that would allow Americans to potentially sue Saudi Arabia for 9/11
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