A review of things you need to know before you sign off on Tuesday; no OCR echoes in retail rates, the high cost of carbon offsets, bank bond costs rise, house numbers rise, swaps firm, NZD soft, & more

Yep.

Robert F. Kennedy Jnr's comments today about FedNow and Bitcoin were note worthy. We NZers should be wary of the RBNZ's CBDC initiatives:

Cryptocurrencies like Bitcoin give the public an escape route from the splatter zone when this bubble invariably bursts. So the White House is colluding with the banksters to keep us all trapped in the bubble of profiteering and control... Nic Carter describes how the White House has organized bankers to participate in a sophisticated, widespread crackdown to destroy the crypto industry. Carter describes 15 incidents where President Biden has weaponized FDIC, OCC + DOJ to force crypto-friendly banks to close their doors to crypto firms since Dec. 3. The recent crackdown on crypto blocks exit ramps, removes alternative rails, and strengthens government control over both the financial and political systems. We should be wary since CBDCs are the ultimate mechanisms for social surveillance and control.

Operation choke point is choking itself

My normie mate almost spat his coffee all over the water cooler when I mentioned ol' ratty's price action today. 

But who is borrowing long? Hardly anyone - as they have been convinced that the OCR MUST fall; the RBNZ MUST pause or reverse course and so everyone is funding short. Ask any mortgage broker, for instance, and they'll tell you to cover for 12–18 months because interest rates HAVE to fall.

Highly dangerous. Because if the RBNZ pushes on with vigour - for whatever reason, then a lot of borrowers who could be borrowing longer term and cheaper now, will miss out, and the implications could be dire.

(This may not be about "Inflation!" as much as many think, but may be more about fixing our economy for a sustainable future).

Because they are being watched by the govt for their excess profits.

Also they haven't increased their TDs much I guess which offsets not increasing mortgage rates.

= Orr increasing the OCR further.

I think they have OCR 5.25% already priced in as far as mortgages go. But call/savings will do up.

You filed and paid taxes recently on 3 years of crypto activity? How was that finalized or calculated, year by year or overall gains - losses? 

did you mean santa?

Credit is simply harder to find now, squeeze is here.

We can see that even here in NZ how many can handle an 8.5-9% stress test and still show mortgage is only 35-40% of income.... not many, if any.

Good game to play if you are One NZ, Pak n Save etc, not so good to play if you are Joes burger bar.

by Independent_Observer | 17th May 21, 4:26pm

Its the script for a perfect storm - lock in as many FHB's at extroadinary prices/debt levels then start the squeeze of rising interest rates.

As long as wages rise at the same rate as inflation...no problem...but can all businesses pass on higher wages to staff if all their input costs are rising as well - it could become a very nasty feedback loop. If they do, it will create more inflation, which the RBNZ will then need to battle by raising interest rates, which get passed to mortgages, which means staff need higher wages, which mean businesses put up prices even higher, which raises inflation, which the RBNZ will then need to battle..(and so on and so forth..)

No upvotes 2 years ago.

Once inflation is triggered by some externality (oil/energy shock, monetary and fiscal policy mistake/s) then it becomes a psychological phenomenon. Raising rates by the central bank to counter this psychological phenomenon in itself creates even more measured consumer inflation because it increases the costs/liabilities on the balance sheet of every household and business holding debt (and we were holding a lot of debt heading into the COVID monetary policy insanity/Ukraine War, oil/energy/fertiliser/food price inflation). This triggers even more inflation/it becomes sticky as companies/households need higher incomes to service increased debt costs so they all raise prices/demand wage increases - so the solution becomes part of the problem. 

Ultimately our problem (and solution) comes down to debt relative to incomes. Pumping up asset/property/share prices by reducing the cost of capital (equity/debt/WACC) is a very stupid idea - hence my warnings on here for many years of what was unfolding. And dropping interest rates during a period when risk was increasing (debt/income ratios were increasing) is counter intuitive to every theory around risk and risk management (we should have been raising rates to prevent debt/income ratios getting so extreme and reducing risk). But here we are. We can't blame any of this on a black swan, nor on central banks raising rates - it was the dropping rates to zero that did the damage and providing excess debt to companies and households within an economy that wouldn't be able to produce the necessary incomes to service that debt over its lifetime. 

https://www.zerohedge.com/personal-finance/california-front-20-down-pay…

That OneRoof article is interesting. Two houses likely making a tidy profit in these troubled times. The renovators did get them for a good price and it seems strangely naïve (or is the word disingenuous?) to say the investors were "pocketing a $225,000 profit on the way" and "made $350,000 in less than four months" when clearly they had to pay for renovations, commissions and lost interest earnings or paid mortgage interest.

I wonder where the peak will be for BTC this time? Will it break the 60k of last time? And why didn’t I bother to buy some at 16k which I felt was the bottom of that cycle? 

Thinking you can time the market movements of ol' ratty is a fool's game. If you had been DCA'ing, then you would probably have the best opportunity of getting the price you want. In fact, those who have been DCA'ing from ATH on a daily / weekly basis will now be ahead.  

Hint Jimbo.... the Left hand side of the chart is easier to trade than the Right hand side.....   love your honesty though

We’ll see. 



He references immigration in the 2000’s. What was the profile of immigrants then versus now?

I don’t know about Aus but the profile of immigrants from the early-mid 2000s in NZ was very different to the profile of immigrants today.

Lots of British people came to NZ (and I think Aus) in 2000s when house prices were affordable compared to the UK, and one pound equalled $NZ3. Lot of cashed up East Asian immigrants came then too. And don’t forget a stackload of kiwis coming back after 9/11 and London bombings with plenty of pounds saved up.

Wealth profile of immigrants is just as important, if not more important, than the quantum. In terms of impact on housing markets.

Maybe if spruikers spruik en masse they can generate some sort of spruikerish herd mentality