US factory orders mixed; Canada PMI retreats; China's budget reveals priorities; EU retail sales low on cheaper fuel; Aussie inflation eases; RBA still expected to hike again; UST 10yr 3.98%; gold down and oil firm; NZ$1 = 61.9 USc; TWI-5 = 70.1

Yeah no need to keep pushing OCR higher, the lagged effects of previous OCR increases are starting to be seen...money is being sucked out if the economy & going straight to banks...

There's a lot of fear-mongering in that article, but it seems light on details. For examply : many are going to face much higher mortgage costs.

Who are the many? The few (compared to the rest) who bought in the last 2-5 years?

Many more will be facing higher mortgage costs, but are well prepared by having a) older mortgages that they b) paid down during the low-interest period. And double that number have no mortgage at all.

What we're going to see here is that a small percentage of a big number is still a big number - but there are far less people as a percentage of the population affected than the story would have you believe.

I also smiled at the old "increased interest rates means increased rents" - already been proven that you are not allowed to increase your rent "because rates went up/deductibility kicked in". The driver of rent increases is increasing population density, so the newly opened immigration floodgates will cause rent increases - which just happens to coincide with the rate increases.

Fun fact. My not so young mother purchased a Lada in Wellington sometime last century. In one spectacular downhill sweep she put paid to three parked cars but the Lada (obviously an early WMD ) and she were virtually unscathed. “It just decided it wanted to go right across the road she explained.”:And sure enough a steering arm had given out. That is one of the Lada’s not the driver.

Fun fact: Lada put together a fairly impressive WTCC campaign for a few years, with relatively narrow sedans but with wheel arches that would put a widebody 911 to shame. 

Seems like you would be able to buy a TCR-spec Vesta Sport for around $250k NZD + GST.

Given pedigree historic cars have rocketed up in price, that's pretty good value for a track-day toy if your numbers come up on Weds. 

So the NZ education system was in trouble a long way back...

A well stocked larder?

Starting to think our next lift is only 25

Why are they not going to Kiwi Banks ?

China is also quickly expanding its state personal surveillance 5G base station network

Thats a great read, funny how gold exports are banned from China.....   They are quite happy to export their Bitcoins for useless USD....

My favourite is the big fat middle digit that the banks have pulled to Orr re passing through the OCR.

Ball's in his court - I expect a swing...and a miss.

By relentlessly depriving investors of risk-free return over the past decade, the Federal Reserve has spawned an all-asset speculative bubble that we estimate will provide investors little but return-free risk over the coming decade.

While 2022 was a challenging year for the financial markets, it is important to place stock and bond market losses in the context of valuations. Every security is a claim on a future stream of cash flows that investors expect to be delivered over time. For any given set of cash flows, the only way to increase the future expected return is to reduce the current price. For example, at the beginning of 2022, investors had priced 10-year Treasury bonds to provide a yield to maturity (average annual total return) of just 1.51%. By the end of the year, 10-year Treasury bonds were priced to provide average annual returns of 3.87% (as were 9-year Treasuries). To achieve that higher yield to maturity, the price decline required of 10-year Treasury bonds in 2022 was (1.0151^10) / (1.0387^9) – 1 = -17.46%, assuming a zero coupon for simplicity. From this lower starting price, the additional yield-to-maturity amounts to nothing but the expected recovery of that loss. The higher long-term return is the result of a larger advance in the price toward the face value of the bond as it matures, and for coupon bonds, of future cash flows being a larger percentage of the lower starting price.

Put simply, higher expected returns go hand-in-hand with lower starting valuations. Long-term returns are not determined by randomly flipping a coin, but by arithmetic. Respect for the relationship between current price, expected future cash flows, and long-term returns is what distinguishes “investing” from “speculation.” Year-to-year returns can experience a great deal of fluctuation, particularly as investor psychology shifts between speculation and risk-aversion. Yet long-term returns are much more mathematical in nature, because they are linked, and must ultimately be produced, by the delivery of future cash flows. There can be uncertainty around those cash flows due to default risk, or in the case of stocks, economic and business fluctuations. Yet in our analysis, the extent of the uncertainty around long-term economy-wide and index-level cash flows is far smaller than investors often seem to imagine. Long-term cash flows are also much less dependent on current-year profit margins than nearly all of Wall Street implicitly assumes when it values stocks based on a single year of “forward operating earnings.”

In the belief that low or zero interest rates left investors “no alternative” but to speculate, regardless of valuations, investors drove stock market valuations to a January 2022 extreme that, on our most reliable measures, stood at 3.6 times the historical norms that we associate with “run of the mill” long-term stock market returns (historically, about 10% annually). Presently, our most reliable valuation measures, based on their correlation with actual subsequent returns in market cycles across history, remain between 2.4 and 2.7 times their respective historical norms. These valuations exceed those observed at the 1929 and 2000 peaks, are matched by valuations observed at market peaks in 2018 and 2020, and are exceeded only by the final speculative advance to the January 2022 extreme. Nothing in our investment discipline requires these valuation measures to revisit their historical norms in the future. Still, it is worth repeating that respect for the relationship between current price, expected future cash flows, and long-term returns is the crucial distinction between “investing” and “speculating.” Link

Lmao, that's Bargie calling quite a big fall in prices. He was saying cost of lending around 6.5% right now so yields need to be higher than that to get investors back in and stop the price falls. Take your average house that used to be $1m, rented at 650 per week so 33,800 p.a., thats just under 3.4% yield. To get that bad boy to a yield Bagrie thinks investors will bite at (say 7%) requires the price of that asset to fall to $480k all else equal. Lets be generous and assume that in the intervening 2 years of price falls rents increase at 5% per annum, so it's now rentable at 720 p.w. / $37,440 p.a., to yield 7% requires the asset to be worth $535k. Didn't realise Bagrie was such a bear.