Monday's Top 10 with NZ Mint: Aussies rushing for the property exits; 'NZX in self perpetuating decline'; Property developers are 'hazards'; Dilbert

Here are my Top 10 links from around the Internet at 10 past 1 pm, brought to you in association with New Zealand Mint for your reading pleasure.

I welcome your additions and comments below, or please send suggestions for Tuesday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.

I'll pop any surplus suggestions I get into the comment stream.

1.' Rushing for the exits' - Australian property owners know in their bones that their market is vastly overvalued.

That's why when it seemed that prices had topped out they started rushing for the exits.

November was the month they did it.

Delusional Economics reports that new listings surged in November just as house prices stalled and auction clearance rates started falling.

It's worst in Queensland.

Here's what APM had to say about the market action in Australia's property market.

During this spring, the number of properties available for sale has risen sharply at a time when housing finance volumes have been trending lower since September of last year and property value growth has been flat since June of this year.

The result of these conditions have been that at a time when fewer people have been actively looking to buy properties, a substantial amount of new stock has entered the market. Ideally, these vendors should have listed their properties earlier in the year when property values were still increasing and buyers were more active rather than waiting for spring.

And here's Delusional Economics on what it means:

The bubble it definitely bursting, although that news wouldn't be new to any of our readers. We have read over the last week or two that this all means that rents are about to "shoot to the moon".  

2. 'NZX in self-perpetuating structural decline' - BusinessDesk reports Bernard Doyle from JB Were has made a submission to the Savings Working Group that the NZX is at risk of extinction.

"The current lack of IPOs (initial public offers), waning international interest and poor market liquidity are not simply a post-recession pause," Doyle said. "They are indicative of an equity market in structural decline, which has become self-perpetuating."

His industry experience suggests the equity market's decline is more advanced than many outside observers perceive, Doyle said.

"The transition from slow steady decline to a rapid irreversible wind-up may prove surprisingly rapid," he said.  

3. Here comes the fifth pillar - Aussie Treasurer Wayne Swan seems determined to impose a fifth pillar on the Australian banking system, whether the market needs it or not. I think he's firing in the wrong direction. The real problem is too much debt generating too much profit, not necessarily not enough competition.

The Sydney Morning Herald reports Swan is due to put proposals to cabinet today and announce them later this week. The plans include:

* Strong measures for credit unions to help them become the fifth pillar of the banking sector.

* Steps to curb excessive bank fees and charges so they reflect costs and not contribute to bank profits.

* Abolishing mortgage exit fees.

* Tax breaks on deposits to replace complex franking credits.  

4. 'Property developers are 'hazards'' - Property developers are now being hammered in our courts. Poor dears. Here's Anne Gibson reporting at the NZHerald:

"Staggering" is how a High Court judge described the behaviour of a pair of property developers and their indebtedness. Associate Judge Hannah Sargisson was left aghast at Cameron Marsh and Mark Perriam, who owed more than $146 million after the failure of their North Shore Perron Group. So she didn't hold back in saying what she thought when she refused their scheme for creditors.

"The insolvents have displayed, throughout, a lack of candour which belies their claims of integrity in commercial dealing.

It is evident in their inability to explain the staggering losses they incurred and why despite 15 years of, on their account, successful property development, their assets were so woefully small and insufficient in even beginning to meet the liabilities arising under their personal guarantees." Worse, she said the pair posed a hazard and she had no qualms about turning down their scheme, also opposed by Commonwealth Bank of Australia, which had lent them $40 million.  

5. Obama is just like Hoover - US economist Thomas Palley hits the nail when he compares Obama to President Hoover, the President before Roosevelt who fiddled while the economy slumped into recession. Steve Keen has republished it on his site with comments. As I've been saying for over a year now, Obama is a liar and a fool because he promised change but kept Bush's policies and staff. HT Rob via email.

In 2008 President Obama captured the nation with a message of change, yet in office he has chosen to deliver change of style rather than change of substance. At the headline level this choice was reflected in his call for bi-partisanship that looked to split the difference with Republicans. In economic policy, it was reflected in the wholesale reappointment of the Clinton administration team led by Larry Summers and Timothy Geithner, a case of continuity not change. Now, the administration is sinking under failure of its economic policy.

That failure is due to its attempt to revive a 1990s paradigm that never worked as advertised and can only deliver stagnation. Painful though it is for Democrats to acknowledge, the reality is the economic policies of President Clinton were largely the same as those of President Bush. On this the record is clear for those willing to see.

The Clinton administration pushed financial deregulation; twice reappointed Alan Greenspan; promoted corporate globalization through NAFTA and China PNTR; initiated the strong dollar policy; spoke of the “end of the era of big government”; contemplated privatization of Social Security; and struck down a core element of the New Deal by ending the right to welfare.  

6. An Australian warning - David Murray, the boss at CBA prior to Ralph Norris, has warned Australians about their high foreign debts, that serves only to highlight how high New Zealand's net foreign debts are.

The chart shows New Zealand between Spain and Portugal, and higher than Australia, Ireland and the US. Leith van Onselen points to the comments.

The assumption that Australia could maintain a high level of foreign borrowings because the economy was underpinned by the mining boom and demand from Asia was worrying.

“That’s a very risky position”. Australia’s foreign debt position relative to the size of the economy is higher than that of the United States or France. Mr Murray admonished politicians for glossing over the risk posed to Australia’s economy from foreign indebtedness. Instead, he said, they had chosen to focus voters’ attention on abolishing government debt.

“The debate is all being run at a level that completely ignores this vulnerability”. If Australia’s economy were to slow, the ability to service those foreign borrowings could be affected. There is also the risk that the cost of foreign capital could rise further, which would be felt by many through higher domestic mortgage rates.

Banks’ foreign borrowings have funded Australia’s housing boom…  

7. A letter from Dublin - Kevin O'Rourke at Euro Intelligence writes about how Ireland's taxpayers have been sacrificed to ensure the European bank holders of Irish bank debt are not sacrificed. It is the most perceptive piece I've read so far on the Irish situation. A must read I reckon.

The reaction to the news that Irish taxpayers are to be squeezed while foreign bondholders escape scot-free has been one of outraged disbelief and anger. At the start of last week, it was possible to make the argument that ‘burning the bondholders’ was irresponsible, since it would inevitably lead to contagion, and the spread of the crisis to Iberia.

That argument has at this stage lost all validity, since contagion has happened anyway. Besides, the correct response to the possibility of contagion was never to engage in make-believe, but to extend taxpayer protection to other Eurozone members as required. Swapping debt for equity in a coordinated fashion across Europe would show ordinary people that Europe is on their side.

It is no longer even certain that the budget will be passed in December. Brussels may not have a Plan B, but they had better prepare one nonetheless. Irish citizens may bring down the bailout of foreign bank creditors by voting at the ballot box, but if they do not, they will bring about a default of some kind by voting with their feet.

We now face a negative spiral in which austerity causes emigration, which increases the burden of the debt, which ultimately leads to more austerity. We need a game-changer to break the cycle, but what might it be? Since the fundamental problem is that Ireland is insolvent, the smart thing to do is to tackle our debt burden head-on, but the Europeans have vetoed this.  

8. Portugal is next - This Reuters analysis explains why Portugal's bailout is now seen as inevitable.

Portugal is likely to need a rescue package of 45-60 billion euros from the European Union and the International Monetary Fund and may not get through the year without seeking a bailout. Investors believe Portugal will be the next euro zone country after Greece and Ireland to ask for help as its borrowing costs have risen above sustainable levels while its economy lacks competitiveness and growth is very slow.

Portuguese Prime Minister Jose Socrates insists Portugal can survive without a rescue and that his austerity budget of tax rises and public sector wage cuts will keep the ship afloat. But many economists believe a bailout is just a question of when, not if, and some expect it could happen before the year-end if Lisbon is persuaded to tap EU funds pre-emptively in an effort to stop the euro zone sovereign debt crisis from spreading to Spain.

"It is very likely that they will ask for a bailout -- maybe before Christmas depending on market developments in the next days," said Juergen Michels, euro zone economist at Citigroup.  

9. Copper being cornered? - The Telegraph reports that a single trader has bought up 80% of the copper available on the London Metal Exchange.

There are fears of a shortfall in supply next year, as mining production is not expected to keep pace with rebounding demand following the recession. Two US investment banks and one UK company also want to launch exchange-traded funds linked to copper, which is likely to suck demand out of the market further.

10. Totally irrelevant video - A dog tries to run and jump in snow. Sort of funny. HT My 8 year old daughter who thought it was hilarious.