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Thursday's Top 10 at 10: Japanese pensioners start selling bonds to fund their retirement; How Australians are transferring wealth between generations; Sandy Weill's Too Big To Fail apostasy; Dilbert

Posted in Opinion

Here's my Top 10 links from around the Internet at 4 pm today in association with NZ Mint.

As always, we welcome your additions in the comments below or via email tobernard.hickey@interest.co.nz.

See all previous Top 10s here.

My must read today is number 7 on printed money seeking out property investments in safe haven economies.

1. This is one way to do it - I think intergenerational wealth transfer will be a big issue in the years to come.

One way it's done in a reasonable timeframe (ie early enough to help the kids when they're having the grand-kids) is for parents to gift deposits and other help when their kids are in their 20s and 30s.

Now we have some figures from Australia at least on how big this wealth transfer might be.

Adele Horin at Sydney Morning Herald reports this help is worth A$22 billion a year in Australia.

This, apparently, is worth more than is spent by the Australian Federal Government on health.

Australians give $22 billion a year to their adult children to help them get established, buy property, and tide them over tough times, a study reveals. And they give another $1 billion a year to elderly parents.

''We've known parents give to their adult children to help them out; we just didn't know how much they gave,'' said the lead researcher, Lisel O'Dwyer, of the University of Adelaide.

The study, funded by National Seniors, examines the transfer of money and time between Australians aged 50 and over, and their children and elderly parents.

2. Is this the moment? - For years doomsayers have been warning that Japan's ageing population would eventually stop saving and start drawing down on their savings, thus triggering an almighty bond market selloff.

Bloomberg reports that Japan's biggest pension fund has started selling Japanese government bonds to start payouts to very elderly savers.

“Payouts are getting bigger than insurance revenue, so we need to sell Japanese government bonds to raise cash,” said Takahiro Mitani, president of the Government Pension Investment Fund, which oversees 113.6 trillion yen ($1.45 trillion).

“To boost returns, we may have to consider investing in new assets beyond conventional ones,” he said in an interview in Tokyo yesterday.

3. Iron ore prices slumping - I've been banging on about the slowdown in China and how it will affect Australia.

Now Chris Becker over at Macrobusiness.com.au points to a 4% fall in iron ore prices overnight as stockpiles build in China and Chinese buyers defer shipments.

4. Yet another banking scandal - The CEO of Nomura in Japan has resigned after an insider trading scandal, the WSJ reports.

5. A Too Big To Fail Banker says Too Big To Fail banks should be broken up  - HuffPo reports Sandy Weill, the man who created Citigroup, now says Too Big To Fail banks should be broken up.

In a stunning about face, Weill told CNBC television that so-called financial supermarket banks do not suit the times and should be broken into their commercial banking and investment banking parts.

The story has quickly gone viral because of Weill’s pioneering role in the supermarket, or universal, model of banking in the late 1990s with the merger of Travelers and Citicorp to form Citigroup.

“What we should probably do is go and split up investment banking from banking, have banks be deposit takers,” Weill, 79, told CNBC’s Squawkbox. “Have banks make commercial loans and real estate loans, have banks do something that’s not going to risk the taxpayer dollars, that’s not too big to fail.”

6. Kim Yong-Un's wedding vows - Andy Borowitz at the New Yorker as gotten hold of the wedding vows from the Great One's wedding to Comrade Ri-Solju. Click through for the full thing.

Very moving. I'm also a follower of the new Great leader on Twitter. He's quite an engaging young fellow.

My Bride, on this our Wedding Day, I wrote this poem for you:

With arms wide open
Under the sunlight
Welcome to this place
I’ll show you everything
With arms wide open
I’ll show you love and laughter and Disney characters
Snow White, Cinderella, Buzz Lightyear, and Nemo the fish
From every Disney movie ever made except “Mars Needs Moms”
Which really blew
And if Disney claims “intellectual property”
I will destroy Disney Studios in a merciless fireball
They stole all their characters from North Korea anyway
Grumpy the Dwarf was totally based on Dad

7. Oh to be a safe haven - Bloomberg reports on housing markets around the world, such as Hong Kong and Norway, that have boomed as money printed in China, America and elsewhere is squirrelled away into safe havens in housing markets elsewhere.

I think Auckland is one of these places, particularly as money printed in China is put into the City of Sails.

Bloomberg starts off with the tale of an increasingly desperate young first home buyer in Hong Kong, Jean Liu.

Liu’s plight is shared by homebuyers as far away as Canada, Switzerland and Norway as a flood of money supplied by central banks globally to prop up the financial system finds its way into markets regarded as havens from economic turmoil and Europe’s sovereign-debt crisis, pushing down borrowing costs and driving up home values. The U.S. Federal Reserve has held interest rates near zero since 2008 to stimulate the world’s largest economy, forcing faster growing economies such as Hong Kong to adopt a loose monetary policy that fuels inflation.

“The Fed’s trying to save the day, yet it’s creating a lot of distortions both at home and internationally,” Mickey Levy, chief economist at Bank of America Corp. in New York, said by phone. “The Fed is understating the magnitude of these distortions,” such as rising real estate prices and low bond yields, he said.

Investors in search of higher returns are moving into appreciating real estate markets benefiting from strong economies and stable governments not burdened by high levels of debt.

8. Why are Chinese property sales and prices rising? - Patrick Chovanec has a look here on his blog. Essentially, it's a big Ponzi scheme created by developers taking advantage of the repressed interest rates offered by government banks for term deposits.

The government’s restrictive measures did not suppress overall demand, as many imagined.  They merely redirected that demand away from 1st-tier cities, towards 2nd and 3rd-tier cities, as well as the countryside.  Undoing those measures would have the opposite effect: allowing demand to flow back to 1st-tier cities like Beijing and Shanghai, while cutting the legs out from under the lower-tier (and potentially much more vulnerable) markets that benefited from the earlier diversion.  Prime urban areas would see higher sales and higher prices, but the nationwide effect would be a wash.  That may help explain the apparent disconnect between the rather astonishing statistics we see coming out of Beijing, Shanghai, and other big cities, and the much less impressive results revealed in the national statistics for June.

It’s also interesting to note, as well, that the latest rebound in Beijing, for instance, took place in anticipation of a policy change, even though buying restrictions and other “cooling” measures remained largely in place.  That accords with my argument that it was the policy signal, rather than the practical effect of the restrictions themselves, that led buyers to shy away from Beijing and similar markets and channel their interest elsewhere.  When the signal was perceived to have changed — when people came to believe the government would welcome a rebound in the city’s property market — they rushed back in, revealing the restrictions themselves to be an inconvenience, at most.

9. Totally a video from the St Louis Federal Reserve about the European debt crisis. This is fun. Wouldn't it be great if the Reserve Bank of New Zealand did videos like this.

"Rolling over your debt is like paying off your Visa card with your Mastercard."

10. Totally Lewis Black on the Daily Show. His rants are always worth a watch.

 

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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13 Comments

#7. Finally. At last. Bernard

#7. Finally. At last. Bernard acknowledges that "he thinks" Auckland IS one of these places, particularly as money printed in China, is put into the City of Sails.
 
That's an incremental shift there Bernard.

I was told today of a local

I was told today of a local Asian RE agent buying on behalf of a China buyer , sight-unseen, a property in Botany area. The price negotiated is $1.6m for a property with a cv of between $800k and $900k.
Time to stop this!!.

Re #2: I'm not worried.

Re #2: I'm not worried.  There will never be any shortage of demand for Japanese Govt bonds.  It's safe corporate welfare and most of the bond investors (even the ones outside of Japan) know this.  Even if there is insufficient private sector demand for Japanese Bonds, the Bank of Japan will be there to buy up any leftovers.

thats right folks russians &

thats right folks russians & chinese push up auckland house prices, so we pinish our export sector sound like NZ real smart.

It will all be fine because

It will all be fine because Bollard has a tool box and in that tool box he has one tool and that one tool is a hammer and that hammer can fix all the problems, concerns and competeing interests of New Zealanders. And with a single blow he can solve everything.
 

I just wonder what future

I just wonder what future generations will think when they look back and analyse the present financial system.  Ponzi?

That'll be the Bollard who

That'll be the Bollard who declared the recession over 4 years ago. Right up there in economic cred with "I declare inflation illegal" Muldoon. 
 
Paul Gignon, where are you when we need you?

Um, B3, how, exactly? - a

Um, B3, how, exactly?
- a citizenship condition in contracts for sale and purchase?  (Just watch the WTO actions roll in).
- a hastily passed law to mandate buying at not more than CV in nominated areas (Just watch the bribery of valuers and officials in designated areas take off)
- a hastily instituted tax on property transactions (a cross between a Tobin and a CGT perhaps)- just watch the re-description of 'consideration' in these contracts change the over-the -counter  number to - quelle surprise - CV, and a parcel of shares or other instruments not mentioned in said contract, passed under the counter to round out the deal.
Issue is the perennial one:  the legal eagles who devise these deals are way quicker, smarter and mobile, than the earnest plods in the Gummint and IRD.
 
Who are thereby condemned to always play catch-up.
 
Or - wait, why not just nationalise all land and housing.  After all, in China, it was at one time not so many moons ago, not legal to sell yer bike to yer neighbour:  the transaction had to take place via a State-run Bicycle Shoppe.
 
Yeah, That'll work out fine......and not a few noble citoyen would probably Vote fer it, way they're feeling at the moment.  Ah, the joys of Democracy.

Thanks for the link

Thanks for the link Bernie.
 
We were shocked today that no one in the mainstream media here in OZ is discussing the falls in iron ore and the possibly collapse in terms of trade...
Seems we get the same old dross that any slowdown in China or commodity prices won't have an effect, neither will Europe's recession. 
 

coal price,s trending the

coal price,s trending the same way---a steady drop of 38 % in 18 months so much so that some mine,s are becoming unviable
the gillard govt have just introduced a mining tax[july 1 along with the carbon tax]--the projected revenue from this mining tax has been allocated-- by the worlds greatest treasurer[swan]in the latest budget to various pork barrelling exercise,s which now appear to be unfunded---funding black holes loom galore--
http://www.smh.com.au/opinion/political-news/budget-at-risk-from-erratic-mining-tax-20120624-20wmm.html

Here is some pornography for

Here is some pornography for pdk. (suitable for work)
http://www.chinadaily.com.cn/china/2012-07/05/content_15550486.htm
 

I didn't think to patent my

I didn't think to patent my air-cooling technology, Missed out there.
 
www.youtube.com/watch?v=BmiXqh0wrTg
 
Must do an update. That was long ago, first day it ran. Goes 24/7 these days, hardly ever look at it unless I have sustainability groups through. Producing twice the amps it did then, too. 

Item 2. When NZ demographics

Item 2. When NZ demographics reach this point it won't be bonds being sold off so much as houses. Supply and Demand = Price?
Ergophobia