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US jobless claims rise; Mexico raises rates again; China clamps down further on outbound cash; South Australia imposes new targeted taxes; UST 10yr yield 2.15%; oil and gold higher; NZ$1 = 72.6 US¢, TWI-5 = 77.1

US jobless claims rise; Mexico raises rates again; China clamps down further on outbound cash; South Australia imposes new targeted taxes; UST 10yr yield 2.15%; oil and gold higher; NZ$1 = 72.6 US¢, TWI-5 = 77.1

Here's my summary of the key events from overnight that affect New Zealand, with news of some governments who are flexing their regulatory muscles.

But first, American jobless claims pipped up last week, although are still at a low level and consistent with steady job gains.

And north of the border in Canada, retail sales there have come in well above expectations with a strong showing in most provinces and for most items. The one exception was for cars.

South of the border, Mexico, which is a G20 country, has raised its benchmark interest rate for the seventh consecutive time and it now sits at 7%. Inflation is a persistent problem in Mexico and it is running at twice the rate their central bank is targeting.

In China, their Banking Regulatory Commission is conducting a sweeping review of the borrowings of some of the country’s top overseas deal makers, in one of the most forceful attempts yet to get a grip on runaway debt. It has reportedly instructed lenders to conduct internal assessments of their credit-risk exposure to a number of very large acquisitive companies. That includes HNA. And overnight shares in these companies, including HNA, fell sharply. HNA has links to New Zealand because it has agreed to acquire UDC.

In Australia, their Federal Government's imposition of a AU$6.2 bln special tax on large banks is being followed up by an announcement in South Australia of a AU$370 mln state tax aimed at the same institutions. This follows a new ATO initiative to go after some very large resources companies for alleged income shifting. The South Australian move however might just be the straw that turns the tide against these measures as it looks like what the targeted companies are alleging - a simple and 'easy' tax grab to plug tax policy failings at the public level. And almost unnoticed in their budget is a new +4% additional stamp duty that will apply to residential property purchased by "foreign buyers and temporary residents". That will take their stamp duty to 9.5% for properties worth more than AU$500,000. If you are a Kiwi living there and not a citizen, are you a 'temporary resident'? Are you 'foreign' if you are not a resident of South Australia?

In New York, the UST 10yr yield is unchanged today at 2.15%.

The price of oil has bounced up a little today today and is now over US$42.50 a barrel, while the Brent benchmark is now just over US$45.

And the price of gold is la little higher as well, up +US$4 and now at US$1,246/oz.

But the Kiwi dollar is a little higher too at 72.6 USc. On the cross rates we are higher at 96.3 AU¢, and 65.1 euro cents. The TWI-5 index is now back up at 77.1 which is where it was on Monday morning.

If you want to catch up with all the 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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28 Comments

I have been making bearish noises for a while, but I haven’t been willing to stake my reputation on it.

I am now willing to stake my reputation on it.

I think we’re very close to a downturn. I will be surprised if this doesn’t come to pass within 6-12 months. If it doesn’t, I suppose you can call me out, if you like doing that sort of thing.

One more comment: it will probably be the fastest downturn in history, owing to the degree of leverage and speculation. Proper preparation prevents poor performance.
http://www.mauldineconomics.com/the-10th-man/the-everything-bubble#

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What reputation is that?

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..he's quoting the article.

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Oh, so John Mauldin's reputation..
Essentially no reputation.

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Thanks rastus - If people used the blockquote or italics HTML tags it would be helpful. Come on it's not that hard!

http://www.interest.co.nz/filter/tips

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Or you could just pull your head in Zachary, its Friday !!

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... Friday ? ... it's Friday Funny Time !

I'd dropped into the PakNSlave for a slab of Speights ... and then drove across to the petrol pumps to top up the car ...

... a yummy Mommy was strolling past with her baby in pram , when she spotted my beersies on the front passenger seat .... she knocked on the window , and as I lowered it , she bent over , showing me the biggest pair of beautifully rounded exquisitely smooth and blemish free breasts I'd seen for many a long day ...

" Hey mister ... I'm a big believer in the barter system ... would you like to trade some beers for sex ? " ...

... I needed only a second to reply ... " Sure thing darling ... what sort of beer do you have ? " ...

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Jared Dillian

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There are bubbles everywhere. It's a matter of what rate they deflate. I suspect everyone will be hit but I think there are certain countries that are going to collapse badly rather than every country.

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I think its pointing to one option left to delay a financial crash - create a war somewhere to stimulate some growth and buy some time. Id say kind old uncle Sam is weighing the options as we speak .. Russia / Nth Korea / Qatar ?

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It will certainly be hot for many if Russia is engaged.

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Sadly this is not a silly statement

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Sears Canada plans to close 59 stores and eliminate 2,900 jobs across the country as part of a court-supervised restructuring process.

http://www.cbc.ca/news/business/sears-canada-ccaa-1.4172736

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More countries/states are beginning to impose some sort of tax on foreign buyers to support locals, except in kiwi land where they give a damn to locals

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surely you are wrong - I'd say "...DON'T give a damn to locals".

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In every other country in the world they build enough houses so they can afford to cut speculative demand without making people homeless, but not NZ - thanks to Phil "must keep land costs high" Goff.

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For those that follow Keynes doctrine:

John Maynard Keynes began his career as a speculator in August 1919...trading on high leverage – his broker granted him a margin account to trade positions of £40,000 with just £4,000 equity.
His work as an economist led him to be bullish .... He learned that his open currency trades had made him a profit of £22,000 ... A jubilant Keynes wrote to his mother from Italy on April 16 to say that he was, “indulging in an orgy of shopping… I think we have bought about a ton so far…” Keynes soon learned that short-term trading on high margin, using only his long-term economic predictions as a guide, was foolhardy......Keynes was wiped out. Whereas in April he had been sitting on net profits of £14,000, by the end of May these had reversed into losses of £13,125. Of this, he later famously commented:

“The market can stay irrational longer than you can stay solvent.”

What Keynes learned was that irrational expectation based on past performance can be deadly. He did recover, and went on the be who we know him to be today. But anyone who believes anything can only go in one direction, might do well to reflect on Keynes experience.

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And his last words?

I should have drunk more champagne

Telling, isn't it.

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What I like most is the light leverage for the era. In the US there were some margin accounts allowed to run up to 99% through the 1920s.

We allow a lot of leverage on housing and the banks have to hold very little capital to back mortgages. It's quite irrational.

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Stocks Of China's Serial Foreign Acquirors Crash Amid "Systemic Risk" Crackdown
http://www.zerohedge.com/news/2017-06-22/stocks-chinas-serial-foreign-a…

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I see the Herald has an almost -hysterical lead story about Ryman making a profit and not paying tax .

Have they never heard of a non-distributable gain arising from the revaluation of an asset ?

Its either the left -wing training of journalists or the dumbing down of the journalist profession over the past decade that causes these sorts of sensationalist non-stories.

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... steady on , dear heart ... aside from the headline , the article was a very well balanced description of how accountancy works ... thanks to Jeremy Simpson of Forsyth Barr ... it is clear that the Ryman " profit " is in fact just an increased book value of the company's assets ... not an actual trading profit ...

Rather harsh on Granny Harold's fine upstanding journos , aren't we !

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Speaking of Charlies and Ryman, what do you make of their big place so named in Rangiora?
- don't tell the main building looks like .

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... had the guided tour 6 months ago ... all mod cons and entertainments for retirees ...

But the name ... what's with Charles Upham and Rangiora ?

... I'd have named the place in honour of our local hero Todd Blackadder : " Todd Hall " ..... nice !

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Peak oil... "Until a few days ago, the 330-meter-long tanker, chartered by Royal Dutch Shell Plc, was steaming at 13 knots toward the Chinese port of Tianjin after loading a 2-million-barrel cargo of North Sea oil at the Hound Point terminal near Edinburgh. Then, it suddenly stopped in the middle of the Atlantic Ocean, according to ship-tracking data compiled by Bloomberg.

Its problem: China isn’t buying much crude right now, leaving the tanker searching for a customer. While the vessel was floating near Africa last week, Shell offered to sell the cargo in a ship-to-ship transfer all the way back in Scotland. There weren’t any takers.

Across the world, the plight of the Saiq, now idling off the coast of Mauritania, reflects a broader trend in the physical oil market. After six months of oil-production cuts from the Organization of Petroleum Exporting Countries and 11 non-OPEC nations led by Russia, crude supply is surprisingly still plentiful, according to traders."

https://www.bloomberg.com/news/articles/2017-06-13/the-lonely-drifting-…

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