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Top 10 at 10: Extracting the Timaru from South Canterbury; Gold at US$6,000/oz?; Behind the blowout

Posted in Opinion

Here are my Top 10 links from around the Internet at 10 to 1pm. 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

1. 'In loco parentis' - The NZHerald's Fran O'Sullivan has written a nice roundup of the South Canterbury Finance situation in the NZHerald.

The statutory managers can now step into Hubbard's shoes and cut any deals on "his behalf". They will be less inclined to try and make any deal fit within the labyrinthine schemata behind Hubbard's overall investment strategy. There is obviously a huge potential for conflicts of interest here. But it is not difficult to reach a conclusion that it suits a wide range of interests - including the Government - for the Aorangi statutory managers to also act as commercial in loco parentis for the Hubbards.

But to all intents and purposes Maier has been acting as a de facto statutory manager since the South Canterbury board - aka Hubbard - appointed him chief executive late last year. What's been missing is the ability for Maier to freeze the company's situation and compromise creditor claims.

2.  The court action grinds on - Jenni McManus at Businessday.co.nz has the story on Nathans Finance receiver PwC filing a NZ$66 million high court action against the directors and auditors, alleging breaches of duty. One to watch.

The claim is against Nathans directors Mervyn Doolan, John Hotchin, Roger Moses and Don Young, and accounting firm Staples Rodway. All are expected to file defences. The lawsuit is separate from criminal charges laid against the directors by the Securities Commission.

But the allegations involve similar issues to those raised by the commission in a depositions hearing against the directors in Auckland District Court earlier this year. Among other claims, the commission alleged the Nathans prospectus, registered on December 15, 2006, lied about the manner and extent of its lending to related parties – in particular, to parent company VTL Group.

Related Topics

3. Out of Timaru - It seems the power is shifting quickly away from Timaru in the South Canterbury Finance saga. It's board, led by Bill Baylis, are meeting at Wellington airport today to discuss the multiple rewrites of its prospectus and a few things swirling around its owner Allan Hubbard, who remains President for Life, but is off the board. The NZHerald's Anne Gibson has the story.

Bill Baylis, the new chairman, said the board would meet at Wellington International Airport because it was the best venue for directors from Auckland, Queenstown and Dunedin. Allan Hubbard, Timaru-based majority shareholder via his Southbury, will not attend after leaving the board this month and becoming president for life. This will be the first time in decades that Hubbard has not chaired a board meeting.

4. Yikes - Fund manager and newsletter writer Harry Schultz has predicted a gold price jump to US$6,000/oz, Marketwatch reports. HT Nicola at NZMint. FYI and apologies I included US$4,000 in the teaser paragraph above. I have corrected. US$6,000/oz is the correct number.

One reason for Shultz' skittishness: what he sees as the extraordinary precariousness of the world financial system.

He writes: "We (collectively) are poised at a heart-stopping moment in economic times. On the one extreme side, the world is on the edge of massive deflation and depression. At the other extreme ... hyperinflation. My view is: Both these extremes are possible. Certainly deflation is, on balance, in play today and gaining ground as money supply is actually declining! Hyperinflation seems impossible when there is not much inflation in most economies. But ... hyperinflation is a monetary event, not an economic one, and will happen on an overnight basis, not via a general uptrend in inflation data."

5. Rudd is gone - How quick was that? One minute he was the hero and the next he was gone. The emissions trading scheme and the mining tax have done for him. Strange how voters don't like tax increases when their mortgage rates are rising...Something for John Key to keep an eye on. Your view? Here's News.com.au latest on the 'spill'.

6. Energy use - The Washington Post’s Ezra Klein posts a useful graphic showing where US energy comes from and how it gets used and wasted, saying it’s “the clearest visualization of our energy economy that I’ve seen.” 

7. Behind the blowout - Check out these CBS videos on what really happened with the BP oil blowout. Essential viewing. HT Gertraud via email.

 

8. Biflation? - Here's an idea from Dian Chu at Zerohedge. Same here? Government costs and health costs are jumping. Other costs aren't.

The crisis in Europe is causing concerns about deflation in the U.S. and other developed economies after weeks of financial-market turmoil. The fears are most pronounced in Europe, where a combination of spending cuts and tax increases could weigh on economic growth and feed into deflation. Financial markets are reflecting a diverging expectation. Gold prices have been soaring—a potential indicator of inflation fears—while many other inflation indicators are going the other way. In the United States, the loose monetary policy has not resulted in any significant rise at the consumer level or changes in inflation expectations, as evidenced by the sharply slowing Consumer Price Index and plunging M3 money supply.

Biflation... Not Deflation Despite the seemingly tame headline inflation numbers, consumers never seem to see price declines in certain categories like education and health. For instance, prescription drug inflation escalated to 5% from less than 3% in 2007 and 2008. So, it is pretty obvious what we have here--biflation--instead of deflation. Biflation is a state of the economy where inflation and deflation occur simultaneously.

9. Canny bugger - Warren Buffett bet France would not win the world cup. Clever man.

 

France fell 2-1 to the host nation today, after drawing Uruguay and dropping 2-0 to Mexico. Berkshire Hathaway Inc. had sold insurance requiring the Omaha-based company to pay a client if France won the tournament, Buffett told CNBC in March. “I think we’re going to lose 30 million bucks or something like that” if France wins, Buffett, Berkshire’s 79-year-old chief executive officer, said at the time.

10. Totally irrelevant video - It's raining oil in Louisiana.

 

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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51 Comments

$6000...wow...I'll drink to

$6000...wow...I'll drink to that.

Mee too.. I'm goona dig up my

Mee too.. I'm goona dig up my loot and retire early!!

Asset bubble much?

Asset bubble much?

Yup Biflation is what I

Yup Biflation is what I picked yonks ago. Didn't call it that though. The game has been to pick the stuff that will be worth more and avoid the 'property' that will not!..to run like hell from debt and avoid the long term bond deals that promised soooo much. Anyone for covered bonds today...we have them with chips or mashed politician.

By jove I think they've got

By jove I think they've got it.

http://www.stuff.co.nz/the-press/business/3849526/Labour-outlines-moneta...

"The opposition would also make it explicit that the bank should use prudential ratios as a monetary policy tool, to regulate banks' overall lending.
"The Reserve Bank Act needs to be clarified to ensure the bank can use such tools primarily for the purpose of supporting Monetary Policy,” Labour's associate finance spokesman David Parker said.

"Labour will make that change. Faced with rapid credit expansion, such as that in recent years, the change would cause the Reserve Bank to use prudential ratios, rather than rely solely on interest rates."

He said the change would help exporters, because it would reduce the bank's reliance on interest rates "while having a moderating effect on the exchange rate".

Ta'ra, Les.
www.mea.org.nz

I think you're right,

I think you're right, Les!

"... if the Reserve Bank had better powers, it wouldn’t need to crunch farmers and other exporters to restrain house price bubbles in Auckland."

Yep, no one has a monopoly on

Yep, no one has a monopoly on common sense. I'm glad to see some indications of it with 'new' Labour:

http://www.interest.co.nz/news/house-sales-down-17-may-year-ago-median-p...

I'm guessing Bernard would agree, 'there are reasonable alternatives'.

Ta'ra, Les.

"Mr Goff said he had a Bill

"Mr Goff said he had a Bill ready to introduce that would support broader objectives for the Reserve Bank. We are in a new economic environment. .... But our economy is out of balance"

This is becoming an bilateral,affirmative action plan. I've always maintained that "our" Government was going to force changes through. Now it looks like which ever party one chooses its going to do the same 'rebalacing" act.

Haven't the RBNZ already

Haven't the RBNZ already begun implementing constraints like this through the Liquidity Policy?

Yes, but not," .. primarily

Yes, but not," .. primarily for the purpose of supporting Monetary Policy." It's well recognised there would be benefits in doing so, see:

Rethinking Macroeconomic Policy, chapter IV, section B, (about macroprudential approaches.)

http://www.scribd.com/doc/26824490/Imf-Staff-Position-Note

and my 1.15pm, above.

Bernard, your teaser line (on

Bernard, your teaser line (on the news page) has Gold at US$4,000.

The article has gold at US$6,000.

Inflation is rife!

If I refresh the page will it be gold at $US10,000?!!

Woopeee $10000...way to

Woopeee $10000...way to go...richer by the minute.

Chris_j Yep. It should of

Chris_j

Yep. It should of course be US$6,000/oz not not US$4,000/oz. I have corrected.

cheers
Bernard

"Inflation is rife!" Disagree

"Inflation is rife!"

Disagree - It looks more like another bubble - because despite this one traditional indicator for inflation, the actual prices for things are not out of control.

Dont forget all the money

Dont forget all the money foreign governments and the super rich are promised, if the us economy dosent find a way to reflate the working class it would be a serious problem since we have lost a must needed manufacturing base. I can see Gold going back to its average 100 or so ounces to buy an average home in the usa. If house prices fall too far history shows even lower ratios where in undeveloped areas but we held between 75-125 ounces of gold for 200 years gold can be converted to any currency ,dont be fooled by the printing press policy of the last 30 years eventually investors will want to hold actual gold to replace some of the world risk ,someones making money at least on paper and it wont trickle down to the worker until we reflate this economy, Gold can plug some of the gap the banks despertely need to have a real balance sheet and believe me gold will be desired by the super rich, its one of the few things that has held its ground over the centuries. As gold becomes more of a reserve asset the true value will be more apperent.Its hard to pop a bubble on an asset that can be horded easliy by the whole world which will eventually push deliveries to a higher percentage to paper contract, when they actually have to go into the market to feed psycical demand higher like 1980 which central banks had far more gold to sell to the market now they dont have the same arsonal .

In my small way, I've noticed

In my small way, I've noticed deflation for the last three or four months.

Decided to sell anything and everything that was not vital, and fully repair anything that was - I sense something in the wind.

I've been merciless to stuff that seemed essential not long ago - but the process has been very interesting as far as Trade Me goes - fewer people looking and far fewer comitted buyers of anything, and only at significantly lower prices.

Also, picking up anything essential is a breeze - and getting cheaper all the time. Boats are a great example - some real bargains

Of course, it won't happen to real estate, will it ...

We should nationalise all of

We should nationalise all of our non commercial Yachts and fizzboats and sell them overseas to really help our current account. just think of the fule we would save. Cheers Didge.

Boats = essential?

Boats = essential?

Anon --I think you are right

Anon --I think you are right about deflation effectively being here. Just look at retailing. They are almost in permanent sale mode. ( My wife says she won't buy anything unless its on sale. If not she'll wait because shes knows it won't be a long wait) It's not that long ago that retailers had a once a year sale.

Good point anon...you can now

Good point anon...you can now buy a boat larger than an apartment for way less loot and owning one is quite a hoot. No rates to pay and dinner kept fresh in a cage over the side. One of them paddle wheelers up the Waikato is the answer.

Oops - not that boats are

Oops - not that boats are essential!

10# http://www.youtube.com/wa

10#
http://www.youtube.com/watch?v=WreG51fJ4g0&feature=player_embedded

More about the hurricane season, which certainly influences all of us, but especially the USA. http://www.ustream.tv/recorded/7808102

WK

@#6&7 It's a terrible chicken

@#6&7
It's a terrible chicken and egg thing....alt fuels won't get cheap without a bit of a push from politicians, but the pollies are hopeless gutless swine who are addicted to oil. It does seem odd that these companies drill these deep holes without knowing how to fix them, and the govts don't insist that proper multiple redundancies or failovers are in place...

http://oilandglory.foreignpolicy.com/posts/2010/06/21/petrostates_what_b...

#5 .. agree with you BH, Key

#5 .. agree with you BH, Key should watch out as sentiment can turn quickly. He backed down quickly on the Kiwibank sale, maybe a last minute backdown on ETS ?!?!?

We will never see another

We will never see another Labour government. National are in for life. Talk to anybody, you'll see that support for National is at an all time high, and that no one wants to ever again see Labour back in power.

LOL. The punters have short

LOL. The punters have short memories and are willing to be bribed by the highest bidder.

Plus every government / prime minister has a use by date.

Lots of folk were picking Rudd to win 2 or 3 elections after his win in 2007.

We aren't talking about

We aren't talking about comrade Krudd and his socialist circus over in Australia, we're talking about John Key and the National Party here in New Zealand. Key's government has been a breath of fresh air and is finally putting this country to rights after almost a decade of criminal mismanagement and neglect! You're dreaming if you think Liabore will ever again see the inside of a government office.

No Ron..you are right about

No Ron..you are right about Labour being criminal but already the socialists are sorting which electorates can be bought off with promises of pork. The recession is not going to go away but memories of 'nanny Clark' are fading fast.

HAHAHAHAHA! Are you

HAHAHAHAHA!

Are you suggesting that National aren't bribing and buying people off?

The few, rich government

The few, rich government controlling key nats are still sunbathing up on the tree, while their thousands of “Nuts voters” are going to rot on the ground- goodbye middleclass !

What happens if you keep

What happens if you keep "replying"?

Like this

Like this

And this

And this

And this

And this

And this

And this

Interesting - a staircase to

Interesting - a staircase to nowhere

You aren't talking about

You aren't talking about Krudd. I am. And I am pointing out the inconvenient fact that Krudd has gone south at a great rate of knots. And it can happen to any government / Prime Minister.

I have no love for Labour. But you are dreaming about National. In their own way they will eventually prove to be as incompetent as every other government of whatever stripe that has gone before.

Either that, or the electorate will get bored and vote them out just because they want a change. And for no other reason they will be gone.

Mate - keep telling yourself

Mate - keep telling yourself that and it might come true, but do not hold your breath!

Guess what tho? I was one of the suckers who decided that the Labour govt had outworn their welcome and voted for the Nats. Do I regret that? Oh yeah, big time!

But wait there's more. Many of the die hard Nats around me are also muttering about wasting their votes on the Nats.

Will I vote for the Nats again next time? Not on your life! Will the die hard Nats I know vote for them again next time? Most probably because they always do, but it says a lot that they are very unhappy with the Nats right now.

The big question is are there enough die hard Nats to make up for swing voters like me who regret voting for that outfit and the die hard Labour people who always vote Labour?

But mate - I wish you all the best with your Nats for life idea.

Ha ha, yes, generally

Ha ha, yes, generally National voters are too ignorant to realise that Johnkey is a socialist.

Watch Bill English frothing at the mouth when he realises he cannot get his red neck policies through , but also knowing he wouldnt be anywhere near in power without his socialist leader.

Wheres my free pink batts John...

Let's see... Key backstabbed

Let's see...

Key backstabbed Brash, who backstabbed English, who backstabbed Shipley, who backstabbed Bolger, who backstabbed McLay, who backstabbed Muldoon, who Backstabbed Marshall, who backstabbed Holyoake,...

Oh and watch out for leaky emails, John. They could be the death of you. Just ask Don Brash...

The US government should buy

The US government should buy all the upcoming hurricanes, before it is to late and China does.

WK

"Strange how voters don't

"Strange how voters don't like tax increases when their mortgage rates are rising...Something for John Key to keep an eye on."

This doesn't compute. Most of those with mortgages are in the upper tax brackets, so they will be seeing tax cuts, not increases.

It's another reason why I believe that those who claim this govt will curb PI rorts are totally wrong.

Glad to see the back of Rudd,

Glad to see the back of Rudd, a bloody ejit in many ways.
Seemed to be prone to panic attacks. Like a leaf in the wind, first he's posting out cheques to all and sundry, dead or alive, then raising taxes to pay for it.
Next he's shelling out home buyer incentives, all that did was raise the price of houses. He's pouring petrol on the fire the RBA's trying to put out.
Net result they had to raise interest rates earlier than anyone else. Aussie home buyers now have both a larger mortgage and higher interest rates.
The mans a fricken genius.

#5. "Rudd is gone - How quick

#5. "Rudd is gone - How quick was that? One minute he was the hero and the next he was gone."

While Rudd was done in on not implementing ETS, would our PM be done in for implementing ETS?

Yes but now silly aussie

Yes but now silly aussie labour voter knows their vote counts for nout when all about is union clout...Rudd had his head lopped off by the lunatic left. Gillard has said she will carry on with the super tax on bigger profits regardless!...go figure.

and push for an ETS. God help

and push for an ETS. God help us here in NZ.

Bernard, far too many Annoy

Bernard, far too many Annoy Mice 'round here.

Call the Exterminators!

Stat!

Bernard, far too many Annoy

Bernard, far too many Annoy Mice 'round here.

Call the Exterminators!

Stat!

Roll on hyperinflation. I'm

Roll on hyperinflation. I'm looking forward to paying off (my fixed rate) mortgage with a postage stamp i.e., Weimar republic economics in the People's Republic of NZ.

Just don't try using a 90's

Just don't try using a 90's phone card!