Here's our summary of key economic events over the holiday period that affect New Zealand, with another quick news wrap-up so you can get back to 'time-off'.
Final trading session of 2023 has resulted in these changes for the year.
- The S&P 500 started at 3849, finished at 4772, rising +24% for the year.
- UST 10yr started at 3.84%, finished at 3.88%, with virtually no net change. Remarkable.
- Gold started at US$1825/oz, finished at US$2062/oz, up a net +13%
- Brent oil 10yr started at US86/bbl, finished at US$77/bbl, down -10.5%.
- The NZ (non-Auckland) unleaded 91 petrol price started at NZ$2.27/L while some excise taxes were suspended, finished at NZ$2.59/L with those taxes reinstated, a net change of +14%.
- Lithium started at US$74,800/tonne, ended at US$13,600/tonne, down -82%. (Watch out for sodium-ion batteries for cars and other uses, in 2024. Much cheaper.)
- Bitcoin started at US$16,527, finished at US$41,812 for a net change of +153%
- NZ 2yr mortgage rate started at 6.58%, and has ended at 7.04%, a net change of less than +0.5% (+46 bps).
- New Zealand savers on the other hand got a good uplift. The NZ 1 yr TD started at 5.21%, ended at 6.15%, a net change of + 0.94%, The difference between mortgage and term deposit rates tightened sharply over the year, and you could audibly hear the squealing from Aussie bank bosses.
- New Zealand inflation was running at 7.2% pa at the start of 2023, ending probably below 5%. The easing of inflation worldwide has been faster, and faster than anticipated.
The other "big number" we should watch is the size of US Federal debt as a proportion of US economic activity. A lot of deliberate misinformation is pedalled about this by partisan doomsters, but that doesn't mask the trajectory issue they have. First, remember annual US GDP is still larger than the cumulative buildup of debt - so long as you only look at what is owed to non-government creditors. Huge amounts of their debt (US$7 tln) is owed to themselves, and in my view "doesn't count". But critics always push that as real debt.
In 2022, total cumulative real debt (built up from day zero) was 93.0% of one year's American economic activity. In 2023 that rose to 96.8%. That is a problem, but not critical by any means. And don't forget, US state and local governments run large surpluses, corporate America is in a large surplus, and US households have an enormous positive net worth - one that grew to US$151 tln in the last 12 months, +US$8 tln. That alone dwarfs the US$2.3 tln rise in the Federal debt over the same period. The US federal 'debt weakness' isn't mirrored in the rest of their society, not matter what the partisans say.
Their were no important data releases overnight in any of the major economies that we track. And the freight indexes we track haven't been updated for last week yet.
The UST 10yr yield is +3 bps higher today, now at 3.88%. The key 2-10 yield curve is lower, now inverted by -37 bps. Their 1-5 curve inversion is a little less inverted, now by -94 bps. And their 3 mth-10yr curve inversion is also little-changed at -152 bps. The Australian 10 year bond yield is now at 3.96% and -1 bp lower. The China 10 year bond rate is also down -1 bp at 2.59%. But the NZ Government 10 year bond rate is up +2 bps at 4.42%. It started the year at 4.54%, with a high of 5.56% in October and a low of 3.95% in late January.
Wall Street is down a minor +0.2% on the S&P500 in late Friday trade having touched a record high on Thursday mid-session. European markets were up about +0.2% overnight. They booked good annual gains in 2023 led by Frankfurt's +19% and Paris's +14%. London only managed a net +2% rise for the year. Yesterday Tokyo ended its Friday session down -0.2% on the day, up +0.2% for the week and up +30% for the year. Hong Kong was unchanged on Friday, up +3.6% for the week but down -15% for the year. Shanghai ended up a good +0.7% yesterday for a weekly rise of +2.2%. But they ended the year down -4.5%. The ASX200 ended its thin session down -0.3% yesterday, up +0.7% for the week, and up +9.3% for the year. And the NZX50 was unchanged yesterday but ended up +1.7% for the short week and was up +1.6% for the full year. (It's year was all down to these last few days!)
The price of gold will start today down -US$12 at just over US$2062/oz and now off its all-time highs.
Overnight oil prices are -US$1 lower at just over US$71.50/bbl in the US. The international Brent price is now just over US$77/bbl.
The Kiwi dollar starts today still at 63.4 USc and unchanged from yesterday. It is up from 63 USc a week ago, and reached its low point for the year on October 20 at 57.8 USc. It's high was 65.3 USc on February 2. Against the Aussie we are holding firm at 92.8 AUc from yesterday. Against the euro we are unchanged at 57.3 euro cents. That all means our TWI-5 starts today just on 71.1 and little-changed from yesterday.
The bitcoin price starts today lower at US$41,812 and down -1.6% from this time yesterday. It is down -4.4% from a week ago. Volatility over the past 24 hours has stayed modest at just under +/- 1.7%. It started the year at US$16,527 so it has risen +153% since then. This crypto started the year at its low point and maxed out on December 6, 2023 at US$44,085.
Happy New Year ! We will have our traditional 'Predictions' story tomorrow. This Holiday Briefing will return on Wednesday, January 3, 2024.
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57 Comments
https://www.abc.net.au/news/2023-12-30/will-consumers-have-to-pay-to-ac…
A commentary on Australia's progress towards cashless society. Probably similar trend to NZ.
RBNZ;
Ian Woolford: Let me start by saying that I believe that maintaining the cash system is both a current and future need. So I don’t buy into a binary narrative involving the death of cash and the rise of digital alternatives because these are not pure substitutes for each other, and we know from our research that
the public values the option of cash. As such, both digital and physical central bank money will be needed to help society and financial systems function, and central banks will maintain their keen interests in the stability of institutions and services, and in monetary sovereignty. Link
https://www.bbc.com/news/world-australia-67723760
A commentary on Australia's progress towards homeless society. Probably similar trend to NZ.
Not a lot of people will regret it. The sort of people who love paying with their watch, and would volunteer to have a chip embedded under their skin, and love buying off foreign multinational companies, instead of local firms, would love a cashless society. Living singly in their tiny apartment room, and spending every cent they are creditted with on trinkets and silly electronic toys, and possibly smashed avocado at regular intervals, they would not even notice the bad things involved in a totally non independent, cashless society.
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Rationed markets are determined by the short- side principle: whichever quantity of demand or supply is smaller determines the outcome (as it is the smallest common denominator for transactions to take place; see Muellbauer & Portes, 1978). Disequilibrium and rationed markets create circumstances that immediately bring economics and politics together: the short side of any rationed market has allocation powers. In other words, the short side has the power to pick and choose with whom it is doing business and how resources are allocated, irrespective of the transaction price. In equilibrium, it is apparently neutral market forces that produce politically palliative outcomes. In disequilibrium, the reality of discrete and arbitrary decisions by allocators (read banks) becomes visible — allocators who can, if they wish, exploit their selection power to extract non-market benefits or ‘rents’...Link
But critics always push that as real debt.
If it isn't treated like real debt - in that it doesn't get repaid by the doing of something real - then will people still believe in money, David? That's the whole point. Money is bullshit - tokens keystroked into existence. You can stave off the day they need to be cashed-in for something real - passing the parcel, inflating the numbers you put against a house or whatever - but sooner or later then get cashed in.
There has never been more proxy - more forward debt-betting - than now. There has never been less physical planet to bet on, than now.
And GDP is an inadequate measure, btw. Measures selected flows, but not stocks. Which leads to people making comments about cheaper batteries....
First, remember annual US GDP is still larger than the cumulative buildup of debt
Past time to eliminate overhead costs of rent extraction from national GDP accounting.
Whereas formal economic models explicitly state their assumptions (whether realistic or not), national accounting frameworks feature various implicit boundaries, which are not shown along with the data but are rather buried in technical notes on ‘methodology’. For example, the interest- based financial services mentioned above were originally considered mere transfers and thus outside the production boundary before 1968 (Christophers 2011). The 1968 System of National Accounts (1968 SNA) moved the production boundary by representing these services as inputs to an imaginary sector (thus making the assumption that they were ‘implicitly’ productive), whereas the 1993 SNA moved it further by considering such services to be the final consumption of households (and thus explicitly productive). The 2008 SNA went even further by stipulating that even the lending of banks’ own funds was a productive activity (dropping the pretense of ‘intermediation’ between savers and borrowers originally used to portray banking as a productive activity). In each of these cases the assumption of the level of productiveness of interest-based financial services was not explicit in the data, but rather implicit in the location of the boundary. Similarly, R&D expenditures by firms, governments and non-profit organizations were previously assumed to be intermediate inputs (or costs) of these entities, and thus deducted from GDP, but have been reclassified by SNA 2008 as investments in fixed assets, and are thus now counted in GDP. This adjustment added around $560 billion to US GDP in 2013 (when the country adopted SNA 2008) - more than Sweden’s entire output that year - and conveniently reinforced “America’s status as the world’s largest economy and [opened] up a bit more breathing space over fast-closing China” (EIU 2013). Different boundaries in the national accounts are thus based on different assumptions and lead to different results, but less explicitly than formal economic models. This contrast with explicit models is thus the second reason why MMT had not yet affected national accounting. Most economists do not even learn the details of national accounting in their professional training, and the measurement (or rather construction) of macroeconomic aggregates such as GDP is outsourced to official statisticians. It is simply not considered part of the conversation, neither in mainstream nor in heterodox circles. Link/GDP overhead
...US households have an enormous positive net worth - one that grew to US$151 tln in the last 12 months, +US$8 tln. That alone dwarfs the US$2.3 tln rise in the Federal debt over the same period.
Market capitalization isn’t “wealth.” It’s the latest price, times shares outstanding. Blotches of ink on paper. Flashing pixels on a screen. If a dentist in Poughkeepsie buys a single share of Apple at a price that’s 10 cents higher than the previous trade, $1.6 billion in market capitalization emerges from thin air. If a single share trades 10 cents lower, $1.6 billion evaporates just as quickly. Whatever happens, every security in existence has to be held by someone until it is retired. Ultimately, the wealth inherent in a security is the future stream of cash flows it will deliver to its holder(s) over time. Price fluctuations don’t change those underlying cash flows. They just provide opportunities for the transfer of savings between investors. High valuations favor the sellers. Low valuations favor the buyers. Investors have never paid higher prices for those future cash flows, or accepted prospective returns so low.
Put simply, the bubble hasn’t changed the wealth, and a collapse won’t change the wealth. What will change is the market cap. I suspect that the erasure of market cap in the coming years, and possibly the coming quarters, may be brutal. Still, no forecasts are required, and our own attention will remain on observable valuations, market internals, and other factors. Meanwhile, even if an investor sells at these extremes, the only thing that will change is who holds the bag. Link Hussman
The UST 10yr yield is +3 bps higher today, now at 3.88%
Treasuries Tumble After $1 Trillion Reverse Repo Drains $190BN In Liquidity, Index Change
Just had a quick look into difference.
Sodium batteries are cheaper,more stable so lower fire risk,more favourable environmentally and stops reliance on China for Lithium,Colbalt and Nickle
Sodium drawback is less energy density than Lithium 250watt hrs/kg Sodium 160watt hrs/kg so heavier, larger batteries
A company in Sweden seems to be making good progress by using a compound called Prussian White
The lithium price has crashed, a tremendous implosion gutting the finances of gullible electric car converts. My wife has one, a Lexus, not because she's a greenie, but because of the government discount, she hates going to the gas station and she doesn't drive it long distances.
There are a lot of alternative chemistries out there with theoretical potential. If you follow battery news long enough you acknowledge the potential but keep your optimism in check.
As replies say, you need to balance multiple factors, safety, durability, charge time, weight to capacity.
Sodium will certainly be cheaper as an input.
Keep in mind the gap between even one battery and millions of batteries - scaling production is hard and there is resistance to anything that uses different infrastructure.
Im not selling my lithium mining shares yet.
The drop in the price is due to the supply chain responding. The price went up and people found more lithium - surprise!
Most people cannot emotionally stomach ratty. And that's understandable. If you could jump into a time machine and go back to the corresponding time period last year, being a BTC holder was gloomy. If you had asked me what the price would be at the end of 2023, I don't think I could have told you. I had penciled in the possibility of <USD10K.
Solana up 999% over 12 months. The biggest winner for 2023 given market cap. Miners heavily dumped over the past 2 days (EOY accounting for the hedgies) but solid 4-6x returns. Found about Aussie miner Iris Energy recently. Will definitely add a little to my sack if I can get the right price in early 2024.
Was in Las Vegas for a wedding. Spent some times there with guys who explained to me (emotionally and excitedly) how the casino worked for them. Great detail. Very positive about it. Extraordinary.
They were even pleased at the extra benefit of being provided free flights and accommodation by the casino.
Could you beat that?
No shame in not being a fan of BTC Dr Y. Your attitude sits in the majority, particularly among the boomer set. I have one boomer mate (close to 70) who's had positions in the Grayscale Trusts and the large-cap miners for quite some time. Don't know of any other boomer who has these kind of holdings. But I'm sure they're out there.
Jamie Dimon has called Bitcoin a "hyped up fraud" and "worse than tulips", etc, He also fronted to the Senate recently with Pocahontas Warren to say "“I’ve always been deeply opposed to crypto, bitcoin, etc., The only true use case for it is criminals, drug traffickers … money laundering, tax avoidance."
Yesterday, JP Morgan announced it is going to be the Authorized Participant for the biggest bitcoin ETF soon to be approved by and run by the Fed's shadow money manager (Blackrock). That means JP Morgan will be buying directly (and with privilege over the little guy) from Blackrock.
What a world we live in.
On the Friday before the New Year, prosecutors have dropped the 2nd case against Sam Bankman Fried.
This court case would that would have disclosed the mainly Democrat beneficiaries who received his campaign contributions. It is an election year. During the fraud trial Caroline Ellison testified that SBF gave the Biden Administration USD10 mio and the reason he told her was to “buy access.” He got two personal meeting with Gensler at the SEC; the CFTC; Maxine Waters and others on the Senate Banking Committee.
The ruling elite taking care of its own.
https://nypost.com/2023/12/29/business/sbf-wont-face-a-second-trial-aft…
The Japanese stock market grew 28% in 2023. Drivers include weak JPY, Buffett endorsement, reform, M&A, stricter public company policies, relatively good economic velocity.
https://asia.nikkei.com/Business/Markets/Japan-stocks-28-jump-in-2023-f…
The US federal 'debt weakness' isn't mirrored in the rest of their society, not matter what the partisans say
Once more for those at the back... If the US Govt runs a deficit then non-govt (households / businesses etc) have to run a surplus. It's basic accounting - the Govt is pumping more new money into the economy than it is collecting in taxes. An increase in Govt debt means an increase in private assets.
This is why the NZ fetish for Govt budget surpluses is so dumb - we have a current account (trade) deficit, so NZ Govt can only run budget surpluses if increases in private sector debt are more than the sum total of the Govt surplus and the trade deficit. This happened between 2005 and 2008 and again 2017 to 2019 when our housing bubble was inflating, but I can absolutely guarantee you that the new Govt will not hit their budget surplus target in 2026/27.. unless they are going to properly go for private financing for infrastructure (which basically involves moving the debt off their books and out the calculation for net debt).
Who said govt debt doesn't matter? I must have missed that. The problem with debt money (of either govt or commercial bank origin) is that it is a call on real resources. If supply of those resources doesn't meet demand then companies hike their prices to exploit the mismatch - aka inflation, or if meeting demand means trashing the planet that ain't good either obviously. Taxation is a good tool to pull some of the debt back and reduce the risk of people bidding up the price of stuff or destroying the workd - but it isn't perfect.
Worth reading How to Pay for War by Keynes by the way.
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