Today we are reviewing the Top 10 interest.co.nz stories of 2012 in association with NZ Mint.
During 2012 we published 5,254 original stories, and delivered an uncounted number of pages of data, charts, calulators and other resources.
All up readers downloaded 11.6 million pages, and made 56,900 comments. (We tried to work out how many videos we produced in 2012 but it is not so easy - however it was probably close to 500.)
It has been our best year ever. So today, here are our top stories of 2012.
We will be back with our 'normal' Top 10 on Thursday.
Bernard is on his summer break and will be back on January 22, 2013, from Wellington.
As always, we welcome your suggestions in the comments below or via email to david.chaston@interest.co.nz.
See all previous Top 10s here.
Happy New Year! Be safe.
#10. No repeat
In March, Bernard Hickey wrote an opinion piece warning of another impending property price run-up. Property guru Alistair Helm took issue with Bernard, and set out his reasons in his own opinion piece on interest.co.nz, and that piece became our tenth most-read story in 2012.
The froth in the property market which catapulted the house price bubble from 2003 to 2007 was more likely to have been driven by the highly active demand from buyers anxious to “get onto the property money train” at that time, certainly influenced by low interest rates, but not solely the action in cutting OCR. Property sales had started ramping up well before 2003, in fact they started to rise in 2001 and kept on rising to peak at over 120,000 sales per year in 2004.
At this time sales are rising – certainly not as fast nor at a frothy level. That would seem to be a very compelling part of the picture to better understand the likelihood for another property price bubble – not that likely.
And this is was our tenth most watched video of 2012; Alex Tarrant's interview with economist Larry Kotlikoff.
#9. Budget 2012
Alex Tarrant's 2012 Budget preview, along with video comment by both John Key and Bill English, was our ninth most read story in 2012. It was the best short preview of the key themes that were to be announced the next day.
The theme of Budget 2012 was confidence in uncertain times, English said.
"Things haven’t all gone New Zealand’s way, but the Budget shows the government’s confidence in getting its own books in order, [and] also in being able to support a growing economy that generates more jobs and better incomes," English said on Wednesday morning.
"Just because things are a bit tough hasn’t diminished our confidence, and we think that reflects the resilience of New Zealanders. They adapted pretty well to difficult times, and I think we continue to show that confidence that we are going to see results," English said.
#8. What lies ahead
One of our earliest pieces of the year became one of our most read. Gareth Vaughan previewed what was ahead for the banking industry in January 2012. It was an item from our subscription Banking & Finance Daily Newsletter. Here is a sample: (how well did he do?)
4) Funding costs.
This is a topic we'll hear a lot about from the bank bosses. The European debt woes have put the heat on offshore wholesale funding markets where the big four banks - ANZ, ASB, BNZ and Westpac - get around a third of their funding.
Three of their Aussie parents have issue covered bonds, supposed to be a cheap source of funding for the banks, during the holiday season paying investors' interest rates that won't thrill the banks.
The ANZ Banking Group this week priced a €1 billion, ten-and-a-half year covered bond issue at 130 basis points over the swap rate. That's up from the 95 basis points over swap its NZ subsidiary got as recently as October when it sold €500 million worth of covered bonds and compares with just 62 basis points over swap in BNZ's €1 billion covered bond issue back in November 2010.
According to Bloomberg ASB's parent Commonwealth Bank of Australia and BNZ's parent National Australia Bank paid about 100 basis points more than premiums on senior unsecured debt issued mid-year when they sold a combined €2.5 billion worth of five-year covered bonds secured by home loans earlier this month. The Australian Financial Review reports that, after hedging the proceeds, CBA and NAB's costs all up were between 210 and 220 basis points over the Australian bank bill rate, or 6.6%. ANZ's were 240 basis points over the bank bill rate, or 6.85%.
In NZ just before Christmas the BNZ raised NZ$200 million in a seven-year bond issue, effectively priced at 246 basis points over swap (or 215 after hedging), up on rates of about 160-165 basis points over swap the banks could get three or four months ago.
Still, there are arguments the rise in funding costs is being over played by the banks. Deutsche Bank analysts argue none of the big four Australasian banks need to borrow more than A$12 billion (NZ$15.5 billion) from overseas wholesale money markets during their 2012 financial years, which should be manageable given their strong credit ratings and other borrowing options available including issuing domestic debt, commercial paper and raising retail deposits.
Although it did not quite make our Top 10 story list, coming in at number 8 on the video list was Bernard's interview with Prof. Steve Keen. It has been watched by thousands.
#7. Kim Dotcom - 'convicted thief'
Bernard Hickey dug into the allegations of US authorities against Kim Dotcom, and after that he wondered what New Zealand gained by letting him settle here. The investigative piece turned out to be the seventh most read story on interest.co.nz in 2012.
The allegations of copyright infringement costing US$500 million and massive money laundering are substantial and backed by numerous intercepted emails showing both how large and profitable Megaupload was for Kim Dotcom and his colleagues at Megaupload (even the company's graphic designer Julius Bencko made US$1 million in 2010).
It details how Megaupload's users and subscribers (which is interesting in itself) were encouraged to upload copyrighted movies and music to Megaupload's servers and then how Megauploads executives, including Kim Dotcom, were fighting against and ignored demands from the music and movie studios to take down this copyrighted material.
One email details how Dotcom encouraged others to copy videos wholesale from Youtube. Megaupload even paid heavy uploaders and then frustrated attempts by movie and music studios to get the uploads taken down. It also forced those who were heavy watchers of copyrighted video to become premium subscribers, helping Megaupload make more than US$175 million from its 180 million registered users. Dotcom personally made US$42 million from Megaupload in 2010, the indictment says.
Traffic around Megaupload made up around 4% of global Internet traffic. When it was shut down over the weekend there was a signficant drop measured in global internet traffic, GigaOm reported.
#6. Nicole Foss
Canadian economist and doomster greenie Nicole Foss visited New Zealand in April with her especially gloomy view of the future. She was interviewed by Amanda Morrall and that video generated some lively debate. Her advice: don't borrow, don't buy. We read and listened to what she had to say, but as the year developed we pretty much rejected her advice. (Actually, this story probably made the top ten due to the extensive international interest in it, which pumped up its volume.)
She describes the property market here as "a trap" that will leave thousands helpless, homeless and bankrupt when the bubble bursts and interest rates rise.
"Auckland is the sixth least affordable city in the world, the property bubble is huge, asset prices have a long way to fall, mortgages here are recourse loans, so if people end up under water, and the house is foreclosed and sold for less than they owe, they will have to cover the difference.
"So it really is a trap, and interest on ordinary peoples' debt are going to rise sharply so people will find their levels of debt unserviceable. This is a trap, do not go through. If you have a job, by all means rent. Don't jump in to the property market especially not in Auckland."
Amanda Morrall's video interview with Foss was also the sixth most popular video we uploaded to YouTube in 2012.
#5. How to set up your mortgage
Early in the year, ANZ economists issued some guidance on how to manage interest rate risk on home loans. Our story on their views was widely read in March and turned out to be our biggest story in that month. We have to say, we were surprised, but it did show that homeowners were concerned about what to do, and this story's success suggested there was pent-up housing demand out there, particularly from first home buyers.
ANZ economists have weighed into the debate over whether it's currently better for borrowers to fix their home loan or punt for a floating rate, suggesting there's merit in splitting a mortgage into three to four tranches through a mixture of fixed and floating rates, thus receiving both flexibility and certainty.
The ANZ team - chief economist Cameron Bagrie, senior interest rate strategist David Croy, interest rate strategist Carrick Lucas and economist Steve Edwards - are cautioning people against jumping into a fixed-term home loan, noting that eventual rate rises are likely to be gradual meaning borrowers have time on their side. They suggest that if you do crunch the numbers, you're likely to conclude the six month, one year and two year rates offer the best breakevens.
#4. Rate cut stories
As wholesale rates fell as credit demand fell, banks started cutting mortgage rates - and term deposit rates too. The trend gathered steam from mid-year onward and home owners got to understand that they could borrow more for the same level of repayments. Slowly at first, the housing market picked up, then late in the year got positively frothy, especially in Auckland and Christchurch. Rate cut stories become some of our most popular. Here », here », here »
Westpac and ASB both moved to cut some of their advertised fixed-term mortgage interest rates late on Thursday, on the heels of cuts by Kiwibank earlier in the day. The Westpac move matched the state owned bank's new market low offers over two and three years, with ASB matching Kiwibank's four and five-year rates.
#3. Ameican spy concerns sink Pacific Fibre
Alex Tarrant had one of the year's biggest business stories - the collapse of the Pacific Fibre project. He reported on comments from insiders who ran into a significant roadblock when the US authorities said that a cable from New Zealand relying on Chinese technology would be a back-door vulnerability to American cyber security.
Pacific Fibre director Rod Drury told interest.co.nz it was made "very clear" by American authorities they would not permit significant Chinese investment in the US$400 million 13,000 km fibre-optic cable linking Auckland, Sydney and Los Angeles.
The next logical step after allowing a Chinese stake in the venture was demands for the use of Chinese equipment and technology in the cable, which would not have been allowed by the US government.
The project had been on track "several times" but ultimately fell through. Pacific Fibre had been caught in the middle of "real political issues" between the US and China, Drury said.
This is the third most popular video we published in 2012:
#2. Olly Newland on property prices
The second most-read story of 2012 was from Olly Newland where he looked at the year in retrospect and reviews what is to come. He followed that up saying he is not worried by a hawkish Graeme Wheeler as Reserve Bank 'not as separate from the govt as you might think'. And he says Labour's housing affordability plan is unworkable.
Never in my lifetime have I seen interest rates so low as now, but I am reassured by the fact that the current rates are in line with the rest of the world. Unless massive inflation appears, there is no reason why rates should ever go up significantly.
A low interest rate environment means that people can afford their mortgages - and even borrow more - which, by the way, is why prices are steadily rising in many parts of the country, Auckland in particular.
Even if interest rates were raised by a quarter or half a point, what difference would that really make?
The side-effect of low interest rates is that savers are tempted to put their money into other avenues of investment, with investment property being one of their options. In my view, the merry dance will continue. House prices are likely going to double again over the next few years. Of that I am certain.
Our second most popular video was of the parliamentary stoush where Trevor Mallard called John Key a liar, and how Lockwood Smith dealt with it. (Yes it surprised us this made #2, but it has been a remarkably popular download ... )
#1. Bernard Hickey's crystal ball
This was our most read story of 2012. Bernard made some important updates following the change of leadership at the RBNZ, and the change of attitude to a more hawkish stance. A key resource for borrowers with a home loan.
Now we've heard from new Reserve Bank Governor Graeme Wheeler for the first time and we've seen the housing market burst back into life, it's worth revisiting the eternal question of whether to stay floating or to fix your mortgage.
The short story is that economists and the financial markets are divided on whether the Reserve Bank will cut or hold the Official Cash Rate over the next year or two. Overall, inflationary pressures and the economy are subdued, but house prices are surging again and the new Reserve Bank Governor seems to be taking an orthodox approach to policy and interest rates, which means he is less likely to cut.
That means my views on Fixed vs Floating are changing.
And this was the most viewed video of 2012.
Overseas debt
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See you in 2013.
9 Comments
As far as Dot com is concerned it would be good if you could do a proper story on patents and copyright
Looking at intellectual property, such as patents and copyright, we see they are also manipulated by greed and stifling innovation and productivity
Some good reading:
Boldrin & Levine: Against Intellectual Monopoly, Here is a very small piece from the free book off the internet
The wasteful effort to suppress competition and obtain special privileges is referred to by economists as rent-seeking behaviour. History and common sense show it to be a poisoned fruit of legal monopoly.
In most histories, James Watt is a heroic inventor, responsible for the beginning of the industrial revolution. The facts suggest an alternative interpretation. Watt is one of many clever inventors working to improve steam power in the second half of the eighteenth century. After getting one step ahead of the pack, he remained ahead not by superior innovation, but by superior exploitation of the legal system. The fact that his business partner was a wealthy man with strong connections in Parliament, was not a minor help.
Was Watt’s patent a crucial incentive needed to trigger his inventive genius, as the traditional history suggests? Or did his use of the legal system to inhibit competition set back the industrial revolution by a decade or two? More broadly, are the two essential components of our current system of intellectual property – patents and copyrights – with all of their many faults, a necessary evil we must put up with to enjoy the fruits of invention and creativity? Or are they just unnecessary evils, the relics of an earlier time when governments routinely granted monopolies to favoured courtiers? That is the question we seek to answer.
AND another very small piece from the free book off the internet
Patents and Copyrights: Do The Benefits Exceed The Costs? - Journal of Libertarian Studies - Volume 15, no. 4 (Fall 2001), pp. 79–105 2001 Ludwig von Mises Institute
What implications do patents have for efficiency in the allocation of resources?
Why would society want to award privileges of this sort to some of its members?
How does society benefit from the existence of patents?
Why should society grant special protection over the production and sale of certain products beyond what is implied in the protection of trademarks?
AND, another free book off the internet
Tom G. Palmer - Are Patents & Copyrights Morally Justified? The Philosophy Of Property Rights & Ideal Objects.
David, would be good to see you do a story on this
The Intellectual property myth and the lack of productivity
In the twentieth century new products were coming out all the time. Washing machines, TV's, vacuum cleaners, dishwashers, telephones, radios, jet engines and on and on.
Just imagine had it not been like that, but just like things are today. What if they had only invented say, the Hoover vacuum cleaner. Every year the vacuum cleaner comes out with fancy new features. Other companies are struggling to get a share of this vacuum cleaner market. People cue up all night to be first to get their hands on the latest new release of the Hoover vacuum cleaner. Hoover are making billions and everyone hails them as the greatest. Just imagine if the twentieth century had been as daft as that, but that is exactly what we have today with Apple and there is a reason for this. A reason why we don't invent things anymore. As I will explain later.
James Watt invented the steam engine, which started the industrial revolution, that led to a big improvement in many peoples lives. James Watt and the capitalists who invested their capital in new factories and the steam engine were handsomely rewarded. They had earned and deserved that reward (apart from playing the legal sytem)
Now consider that reward system with the reward system used today.
A CEO who has a five year university degree, does not invent anything, nor owns a company, and contributes nothing to improving society, yet gets paid hundreds of times the average wage and gets to control large corporations without owning them. Why? because society says their intellectual property, which is their claimed knowledge and skill is extremely valuable.
Just think how that would have worked in James Watt's time. A CEO would have received tens, if not hundreds, of times the income of James Watt and the capitalists who built the factories. I can only conclude that had they tried that trick back then they would have been hung, drawn and quartered. My god, how did we let this happen?
We now live in a society in which ones own intellectual property is the thing to strive for. Even if this intellectual property is useless or even destructive to the society we live in. We have been invaded by, and taken over by business and finance academia. Like a cancerous monster engulfing and destroying us. That has to change if we want a return to a decent and productive society.
And that should be most watched film in 2013:
The Queen of Versailles:
David and your team, well done and thanks for your efforts in 2012; and all the best to you and other contributors for this year.
Couldn't help noticing the last graph on overseas debt. Am pleased to see the private part of this continues to drop, and some credit even to the banks for apparently reducing their reliance on overseas funding.
It only now needs the government to fund more of its needs onshore. Apart from reducing our exposure to foreign lenders, with the consequent free gift in interest and capital returns to them, reducing this borrowing would keep the exchange rate in check, with positive virtuous effects on our own economy, including a lower need for extra government funding at all.
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