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Monday's Top 10 with NZ Mint: A London banker turns on his own; More fake bonds; Casino capers; Emissions trading fail; The anti-science movement; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at 2 pm in association with NZ Mint.

I welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.

I'll pop the extras into the comment stream. See all previous Top 10s here.

#1 is my must read today.

1. 'Ban securitisation and break up the banks' - Terry Smith, the CEO of London broker Tullet Prebon, is an unlikely supporter of the 'Occupy' movement.

He describes himself as having views that are pro-market, pro-small government and sceptical of climate change science.

Yet late last week he threw a big hairy cat among the pigeons in the The City of London with his 'Is 'Occupy' right' speech at the annual World Traders lecture at Guildhall in the The City.

He attacked his fellow traders and bankers with the force and accuracy that only someone can do when they know the heart, lung and guts of the beast inside out.

Anyone who has been to this type of event knows it is right in the heart of the City.

It's a bunch of brokers and investment bankers quaffing champagne and slapping each other on the back. I regularly went to these events when I covered banking for Reuters in London.

It's the last place you'd find someone who sympathised with anything in the 'Occupy' movement or anyone suggesting banks and brokers be controlled or reformed.

Smith unleashed with a call to ban securitisation and break up the banks on both sides of the Atlantic. To be fair, he was also against a Tobin Tax and regulation of banker pay, but he makes some strong points.

Here's the speech (which is well worth a read in full) and a sample:

On breaking up the banks:

What is needed is the full separation of retail and investment banking. The Volcker rule is bogged down in the minutiae of the definition of proprietary trading and Vickers is so far off from implementation of even ring fencing that it will have no impact at least for many years. What I would suggest is just simply undo the repeal of Glass-Steagall and introduce the same restrictions on this side of the Atlantic.

And on securitisation:

The severance of the link between lender and borrower which existed when I was in banking led to a mispricing of risk with catastrophic consequences. Historically, lenders exercised caution because eventual repayment depended upon the viability of the borrower. Securitisation not only broke this all-important link. Now, lenders could issue mortgages in the comforting knowledge that, if the borrower failed to meet his commitments, someone else would bear the loss.

This distortion of the relationship between lender and borrower led not just to the mispricing but to the reverse pricing of risk, such that lending to the riskiest borrowers became a high-returns process because risk could be unloaded. This process ran its wholly predictable course in the subprime disaster. Securitization should be banned. People should have to hold assets they are responsible for until maturity.

I wonder what he thinks of covered bonds. They're not quite full securitisation, but they still break that link...

He also calls for the reversal of the 'Big Bang' reforms in the City of London from the mid-1980s:

It may seem inconceivable that any of the Big Bang reforms will ever be repealed but until they are I think we will be condemned to suffer the sort of mistakes, malpractice and calamities which helped to cause the current financial crisis.

You may ask the question: what does this mean for New Zealand. Not much immediately, is the answer. Our banks are simple things that haven't polluted their balance sheets with dodgy gambling on markets or securitisation.

But, indirectly, it's worth watching what happens in London because it remains the centre of much of the world's financial markets, which we rely on to fund our unsupportable lifestyles.

Here's the video of his speech:

2. Fake bonds - BBC reports Italian police have uncovered US$6 trillion worth of counterfeit 1934 era US Treasury bonds.

3. Capital controls - As the debate around the world about capital controls heats up, Argentina has imposed yet more controls, including forcing companies to repatriate export revenues.

I'm not sure I'd go this far, but it's worth knowing about. Not everyone believes in the lily-white level playing field and most play as if there are no rules.

Here's Bloomberg:

With Argentina blocked from international credit markets since a 2001 default, Fernandez depends on a trade surplus to bring dollars into the economy. After winning re-election in October, Fernandez ordered energy and mining companies to repatriate export revenue, tightened oversight of foreign exchange purchases and told insurance companies to bring investments back into the country.

“The controls were very effective and there has been a strong slowdown in outflows,” said Jorge Todesca, a former deputy economy minister who now runs Finsoport Economia y Finanzas research company in Buenos Aires.

4. Listings lag - Realestate.co.nz's Alistair Helm has analysed his listings data at unconditional and estimates a six month lag between sales and listings.

He sees a 15% rise in listings in 2012. The chart below is a cracker. Here's a sample:

Looking at this most recent 5 year period, the supply side cycle tends to lag the demand side cycle by around 6 months. That is to say that the actions of sellers seeking to list their property tends to lag the ups and downs of property sales. This is highlighted by the horizontal arrows tracking each of the peaks and troughs of this 5 year period.

This would infer that sellers judge their intent to list a house by a view of the level of recent sales – probably witnessed by “Sold” signs and media commentary. This lag is likely to explain why the market often gets over supplied even after sales have slowed; and as we have seen recently, sales are picking up whilst new listings remain low.

This current situation where property sales are rising faster than new listing is shown on this chart by the blue line intersecting and rising ahead of the red line of listings has occurred once before,albeit for a short time in 2009. That occurrence as a fall out from the global financial crisis lead to a significant build up of inventory as sales fell sharply through 2010.

5. Casino caper 1.0 - Steve Wynn is a legend of the casino business in the United States. Anyone who has been to Las Vegas will know his signature Wynn Las Vegas resort.

Now Wynn has forced out a long time business partner with accusations of bribery and corruption. This one will run and run.

Casinos seem to breed ...um...unusual business practices.

Here's the Reuters report.

The company accused Okada and his associates of making improper cash payments and gifts totaling about $110,000 to foreign gaming regulators, including in the Philippines.

Okada is chairman of Universal Entertainment Corp and made his fortune off pachinko machines, a cross between pinball and slots, popular in Asia. He and Steve Wynn, the company's founder and also a self-made billionaire, were close friends and business partners for 12 years before their relationship turned sour.

6. Casino caper 2.0 - The Sydney Morning Herald reports the Star casino in Sydney is now embroiled in all sorts of allegations after a takeover by an American casino operator seems to have unleashed all sorts of dodginess...

I just can't see the need for casinos. Welcome your thoughts.

A FORMER senior manager at the Star casino has turned whistle-blower to reveal the extent of illicit drug use, sexual harassment and bullying at her former workplace. The allegations will feature in an interview with the manager for Channel Seven news, to screen tonight.

The claims follow a damaging fortnight for the Star, during which the Herald revealed Tabcorp, which until last year ran the casino, was warned about drug and alcohol abuse among casino executives and advised to swab offices for cocaine residue and introduce ''sobriety tests''.

Last week the Casino, Liquor and Gaming Control Authority announced a snap inquiry into the Star, following the sacking of its American managing director, Sid Vaikunta, for his ''behaviour in a social work setting''.

7. Relegated - Bloomberg reports on the relegation of Greek bond holders interests to junior status after the European Central Bank helped itself to a restructuring of its debt without the 70% haircut that private bond holders are getting...

I still can't quite work out why anyone would buy Portugese or Spanish bonds when there's the risk they'll be wiped out by dictat from a Eurocrat...

Here's the slow rising outrage in Europe:

The ECB will exchange its Greek debt for new bonds with an identical structure and nominal value, though they’ll be exempt from so-called collective action clauses (CAC) the government is reportedly planning. That implies senior status for the ECB over other investors, according to UBS AG, and the use of CACs may lead to credit-default swaps protecting US$3.2 billion of Greek bonds being tripped.

“It may appear that the ECB is receiving preferential treatment, raising questions about whether the ECB is senior to private-sector bondholders,” according to Chris Walker, a foreign exchange strategist at UBS, the world’s third-biggest currency trader. “If a coercive default does indeed eventually take place then a CDS event seems very likely with all the negative consequences for risk appetite that may bring.”

8. Emissions trading isn't working - Spiegel.de's Alexander Jung reports on the problems now evident in the carbon trading system in the European Union. A carbon tax is a better idea, in my view.

Here's Jung:

Emissions trading, the European Union hoped, would limit the release of harmful greenhouse gases. But it isn't working. The price for emissions certificates has plunged, a development that is actually making coal more attractive than renewable energy.

 

9. The anti-science movement - Robin McKie writes at the Guardian about how research paid for by big business is driving science back in to the dark ages. HT for the last two links to @samfromwgtn

Most scientists, on achieving high office, keep their public remarks to the bland and reassuring. Last week Nina Fedoroff, the president of the American Association for the Advancement of Science (AAAS), broke ranks in a spectacular manner.

She confessed that she was now "scared to death" by the anti-science movement that was spreading, uncontrolled, across the US and the rest of the western world.

"We are sliding back into a dark era," she said. "And there seems little we can do about it. I am profoundly depressed at just how difficult it has become merely to get a realistic conversation started on issues such as climate change or genetically modified organisms."

10. Totally Jon Stewart on Barack Obama's efforts to raise funds from the 1%. It costs US$35,000 to buy a ticket for dinner with the President and just US$200 for a ticket to watch the Foo Fighters.

"I ate a pork chop that cost the same as a Lexus."

 

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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30 Comments

1, 8, and 9 are inextricably

1, 8, and 9 are inextricably linked.
 
To keep doing what you know is not good in the long term, you have to deny it's happening. If you have a vested interest in the status quo, you pay spinners to spread sdisingenuity on your behalf. Or you actually convince yourself what you want to hear, and spout it.
 
Eventually, you have to deny the truth. Which means ignoring science, and a society which goes down that path, with more population, more build infrastructure, and more resource/energy demand than ever before, is in deep shit.

Consistency Bernard....he

Consistency Bernard....he used the sh-t word....and made it worse cos it's deep sh-t...oh look the banks have taken another billion from the economy...profits on their created credit...best scam in town...property bubble under govt protection as per normal...four letter S words are a NO NO but parasitic bank behaviour is fabulous stuff.

Re: #1 - wow, a bookie with a

Re: #1 - wow, a bookie with a conscience - times are a changing.  

And now to something that is

And now to something that is informative, a ray of sunshine on the dirty little games being played...
http://www.marketoracle.co.uk/Article33213.html
Yes it's the usa but we too are running massive deficits or have you forgotten...and have we been allowed to see a table of data that displays a pathway out of the deficit hole...or must we just accept Bill English and John Key will produce a surplus in 014...oops sorry 015....oh it's 016 now....right ho.
You see folks, they haven't got a clue...neither of them....the revenue stream is still falling and the worst of the recession in europe, the usa japan and China...yet to come along and knock the you know what out of this unbalanced property speculators wildwest economy....and when it does....you can kiss goodbye to Mr Surplus.

Well the more things change

Well the more things change the more they stay the same aye Wolly and Powerupkiwi
same old stuff on here house prices and bankers and oh the worlds overpopulated  ahhhh
we are running out of oil save us .
well the good news is there is plenty of oil left and the greenies are big oils friends when
it comes to oil running around saying we are all doomed.
Tell me how if I were to drill down say 10000 feet and strike oil that is on say a rig on land how can that ever be fosil fuel its impossible the oil comes from the earths crust we are never going to run out. Also in 2011  I purchased oil stocks in the US they are all doing very well at prescent its only going to go up its called the Petro Dollar
                                                                                                                          Baz

Good for you Bazz...black

Good for you Bazz...black gold Texas tea....the centre of the earth is one giant puddle of the stuff...hahaaaaaahaaaaa....
 

Baz, this is non-science and

Baz, this is non-science and long since dis-proved....you wont drill down 10000feet and find oil on land by and large....its even unlikey now if you are several miles off shore.
ie Do you really think BP would be that far out and that far down if what you say is true? no...
Sure US oil stocks are up, they make bigger profits on a high oil price......and sure they will hold thier value (all else being equal) for some years....
and yes the world is over-populated....but peak oil will solve that for us as nature takes its course....without cheap oil to make food that's inevitable.
regards

steven you are incorrect like

steven you are incorrect like a lot of stuff on this blog they are drilling down 10000 feet on land and getting top grade oil
                                                              Baz

duplicate removed

duplicate removed

So Baz, when the Petro $ goes

So Baz, when the Petro $ goes up in price i take it you put jelly into your cars/vehicles  engine so you make a real gain?

He probably will, of course

He probably will, of course if oil increases then food and most other goods will also be increasing in price.. Hmmm, might have to find something cheaper then Jelly Baz!

#9 - Anti-science? - no

#9 - Anti-science? - no way... our government is different - after all our PM appointed a Chief Science Advisor, eh, DavidB.
Here's a follow on to the #9 article:
Canadian government is 'muzzling its scientists'
http://www.bbc.co.uk/news/science-environment-16861468
 

It happens everywhere. I

It happens everywhere. I doubt any scientist in our CRIs is allowed to talk to the media without first clearing it through their CEO first. At least NZ is not as anti-science as the US Right appears to be. This seems to be partially due to influential lobby groups protecting their industry backers through donations and mis-information.
I'm reading an interesting book at the moment about how Germany lost its position as the centre of scientific achievement (e.g. Einstein, Heisenburg, Schrödinger, Plank et. al.) thanks to rather extreme Nazi policies.

re #2 There seem to be a lot

re #2 There seem to be a lot of these 'fictitious' bonds turning up in the last couple of years. Many from the same gold backed 1934 series as these newly discovered six trillion worth.
1.6 Trillion worth recovered in Spain in 2009. http://upintelligence.multiply.com/reviews/item/28?&item_id=28&view:repl... -not the greatest source I know but I don't speak Spanish and is the only translation I can find-
Again in '09 two Japanese passport holders on Italian-Swiss boarder with $134B worth and in Milan two Philipino's with $180B worth. http://www.guardian.co.uk/world/2012/feb/17/fake-us-treasury-bonds-seized
There are also two ongoing court cases in the states involving these bonds. One for 1.1T http://www.courthousenews.com/2011/12/05/41930.htm and another involving three quarters of a trillion involving the same bonds. http://www.courthousenews.com/2011/12/23/42507.htm
It all seems a little fishy, strange also the lack of coverage on major news networks here on the 6T worth story Bernard links to. As far as I could see only RNZ has picked it up, strange for one of the biggest, if not the biggest attempted frauds in history. I might sound like the tinfoil hat brigade here but I'd love to see some age testing of paper, ink, the chests, etc against 1934 bonds known to be real.

How you can tell that the

How you can tell that the peak oil debate is (almost) over
Now, we have the equivalent of that with the publication of a major piece in Nature, a respected scientific journal, but one that mere mortals are able to read. The piece in question has the reactionary forces in full attack mode.
http://www.energybulletin.net/stories/2012-02-19/how-you-can-tell-peak-oil-debate-almost-over
http://www.nature.com/nature/journal/v481/n7382/full/481433a.html

the whinning in the recent

the whinning in the recent shell's exec talk I posted says it all....$5USD a USDgallon expected this year...but its the administration's fault for not letting us drill......baby drill...
regards
 

Peak oil is dead , there is

Peak oil is dead , there is vast amounts of oil.
                                                                       Baz

Goverments control science

Goverments control science and education most of the crap thats coming forth about man made global warming is Goverment funded. High schools and universities are goverment re-education camps. The end game is you the people are the cause of all this mess we are in. so we must de populate the earth  blah blah blah the same lies the nazis used .
                                                                                                                                   Baz

"Goverments control science

"Goverments control science and education most of the crap thats coming forth about man made global warming is Goverment funded.", 
This seems to be rather contradictary, the reaction of people who don't like the scientific theory (or the implications of the theory) relating to global warming or the theory of evolution is to insist that the theory is illigitimate and should therefore be censored by the government school system. This especially holds as a contradiction when you are claiming that the theory is already being influenced by the government. It can never be the basis of a scientific challenge to the theory because science doesn't ever censor its conclusions.
"High schools and universities are goverment re-education camps."
This does not present a very charitable attitude towards human intelligence, or scientific ability. Its abundantly obvious that if there was a grand conspiracy in the theory of global warming that mass education about the underlying science behind this theory would reasonably soon result in the debunking of the invalid theory being taught. Because the development of science is and has always been about science and the scientific process overcoming the limitations of insufficient or invalid concepts through observation, experiment and deducation.
The same contrarians should on this basis in fact favour a strategy of mass education through a scientific framework of the theory of climate, because the invalid concepts are sure to be challenged and eventually exposed. The obvious fact is the more eyes who examine a mistake, limitation and flaw or a lie then the more cases there are of somebody pointing it out.
As somebody who thinks the science is very solid and valid myself I think it would be quite legitimate and even useful part of education for various pieces of climate change schepticism to be discussed and any known mistakes in their scientific method or reasoning studied. Obviously if there were any pieces of climate change schepticism without known flaws I would also advocate these be in the curriculum as well. Identifying pseudo-science from real science and critical thinking is in my opinion an area where lower levels of education could do much better.
 
 
 
 

Steven the fact is they are

Steven the fact is they are drilling on land to a depth of 10000 feet and getting top grade oil
so why discredit me for pointing out that fact . there is over 250 years of oil under the USA untapped .Billions of barrels . As far as over population goes the whole worlds population could fit into Texas in houses with enough room left for each to have a backyard.
                                                                                                                            Baz

Baz- back a ways, folk like

Baz- back a ways, folk like you burned witches, and harangued folk like Galileo and Darwin.
 
All those moves are in defence of an existing paradigm, and all are based on fear.
 
Regardless of emotions - and fear is an emotion - things that will happen will happen. Facts and figures, dispassionately appraised, are the way to go, and science does that.
 
Science, for instance, does this:
 
http://www.hubbertpeak.com/bartlett/hubbert.htm
 
To ascertain that even if we doubled the known reserves (and most of the planet has been surveyed, there are no Ghawars yet to be found) it would only delay peak to 2030ish.
 
Compare that analysis, to your 'billions of barrels'. Currently we gothrough 85mbpd, so 12-odd days to the billion barrels. Your 'billions' is 'lots of 12 days'. Compare that ignorant comment with the Bartlett analysis.

Man made global warming is a

Man made global warming is a religion powerupkiwi you must be a high preist as well the only fear is coming from the members of this new global religion . As to burning witches at the stake take a look at the members of this new global religion what a bunch of self righteous freaks, we are not the cause of climate change .
                                                                                                               Baz

Thank you for your

Thank you for your information-filled, referenced, peer-reviewed contribution to scientific advancement.
 
Unfortunately, climate change will be the least of your worries, and as I've repeatedly pointed out here, will not be first cab off the rank. The interesting thing we can learn from the 'debate', though, is that we won't have a meaningful debate. The same folk who start from the position of needing to deny the possibility of climate change and who therefore deny it, are going to apply the same lack of dispassionate logic to resource-scarcity / population overshoot.
 
As you prove, oh fearful one.

Powerupkiwi  you are 100%

Powerupkiwi  you are 100% incorrect about oil reserves you are  fear mongering .
we are not going to run out . Im going to buy more oil stocks because they are cheap
and offer a far better return than wind farms . By the way my three vehicles are emisson free
that is done by 100% burn of the fuel in the combustion process they run on standard nz fuel that is they are  1.  diesel       2.  91 octane  3.  lpg  .    now you and NIC THE NZER Know so
much about  science can you please explain how I have achevied this ground breaking tec
I never was taught this at school I only achevied school cert Science.
                                                                                                                                Baz

Well done on the 100% return

Well done on the 100% return on your fuel. Most of us still have radiators.

You have clearly got the

You have clearly got the wrong end of the stick, because far from claiming that you should simply accept my word about this, you should not. In fact you would clearly be more convinced if you didn't need to accept anybodies word about any of the science and could understand the theory and make up your own mind about it. Thats basically the basis for science anyway and thats also why anybody who is suspicious of the theory should welcome better scientific education.
The basis for this is that once the teaching of science develops it enables the student to better reason about the arguments which the theory is based on. This means that they can then form their own opinion, including rejecting the theory being taught. Unfortunately the lower levels of teaching tend to simply state conclusions and don't develop this ability as much as I think it should.
To illustrate how this works imagine that you didn't learn to add at school. Say somebody in a shop charges you for some goods. How can you then dispute the price the seller charges? You can't because without knowing how addition works you can not reason about the price they are charging you. Somebody in this state is left totally dependent on the seller adding up the tab fairly, totally dependent on their 'expert' opinion.
Its unfortunate but you seem to be left in the same situation regarding climate science, simply having to accept the word of one expert against another with no basis for reasoning which is correct yourself. But on this basis you should support the teaching of climate science in school, because it resolves this situation for others, and allows them to make their own mind up for themselves.
I have made my own mind up about the climate change debate because all of the ideas presented by sceptics (which I have seen) have flaws in their reasoning which I can observe for myself and on the basis of ideas I understand. As I said I think teaching this kind of critical thinking (while discussing a conclusion which is invalid) would actually be constructive use of education even at lower levels.
 
 
 

Nic - you can get to it by

Nic - you can get to it by logic-path and stats too. The simple doubling-time withing a finite sphere of operations thing, back-cast from the inevitable final outcome, does it. The last doubling used up the last 50% of whatever. Absolutely irrefutable that it did. The penultimate doubling took from '3/4 of the resource still available', to '50% left'. Anyone who argues for unlimted growth in consumption, whilst saying "there's heaps left" at, say, the '1/4' used mark, is either not too bright, or purposely fooling themselves. Or, of course, purposely attempting to fool others......
 
My better half did a bit of work on a thing called 'Critical Literacy' at the Otago Uni -  you can't overdo the teaching people to think for themselves.

Powerup Im doing something

Powerup Im doing something about polution My engines are emission free that is no toxic
emissions out the pipe , the only aparent sign is on the diesel is the smell is like jet fuel
at the airport in the air. the burn temp is a lot higher so the exhaust gas is very hot as are the petrol and LPG engines about 20% better fuel consuption as well and amazing power increase. No Toxins complete burn
                                                                            Baz

Powerupkiwi  I dont beleive

Powerupkiwi  I dont beleive you are that interested in facts or science  sad really