A review of things you need to know before you sign off on Tuesday; tax take softens, ANZ cautious, mortgage borrowers go short, KiwiSavers who take risk doing best, Wayve makes the big-time, swaps stable, NZD unchanged, & more

well not sure we had much choice as the wrong govt was voted in 6 years ago

sure we had a pandemic but Labour blew their wad before the recession got here.....

Gotcha. So...

1. Businesses print themselves some New Zealand dollars
2. Businesses give those dollars to workers in exchange for work
3. Workers pay their Govt taxes with some of the dollars they get from businesses
4. Businesses pay Govt taxes with some of their dollars
5. So, to stimulate the economy, Govt just needs to take fewer of those dollars away from businesses?

Never looked at it that way before. 

Approx 60% of households are not net income taxpayers after allowing for credits, benefits & receipts.

Again, you keep portraying this as if it's working for families, jobseeker, etc that is causing that stat when the main driver of it is superannuation. Literally 50% of the welfare budget is super, then another big chunk is the accommodation supplement which may as well be a direct transfer to landlords.

It's painting a false picture that there is a bunch of working-age people sitting around doing nothing which just isn't true.

Here is the old document where that stat originated from.

And another one that links to the new report that was released very recently.

Wot!  There is an economy beyond the government.  Who woulda thought.

Double entry accounting has a neat symmetry, but it does not rule the world.

True. At a macro level, a trade surplus would mean offshore NZD savings being spent into the domestic economy. Yes, that would be stimulatory. Now what have we got that is worth more than oil ($10bn / yr), cars ($10bn), and machinery ($8bn)?

Or stop buying stuff from overseas like oil and cars 

Oh wait the govt just doubled down on ICE cars (and therefore oil)

It wasn’t free.It was what New Zealanders had earned and paid the government for earning it. But that government took it, spent it, with little more concern  than Santa running  a lolly scramble. 

The whole 'cleansing recession' thing is next level stupid. Countries that try that permanently fallback from their peers. We did it in 1990/91 and we are doing it again now.

My prediction is that this Govt will spend more than Labour over the next few years. They won't have a choice - Govts are forced to spend in recessions. Look at the UK - shiny new Tory Govt elected in 2011 on a platform of 'fiscal prudence', 'cutting waste', and 'reducing the Govt debt'. How did that go? They failed spectacularly and turned the UK into a laughing stock.

Yeah I think you're missing the bigger picture due to your confirmation bias.

The apocalypse is not confined to SF. It's quite widespread. TBH, I expect CRE values to hold higher in places like SF compared to say St Louis. 

Anyway, I never made the claim you can't go wrong with bricks and mortar. 

This is from Audaxes link below.  It's about stock valuation, but it equally applies to CRE and it illustrates my point perfectly.

Multiplying depressed earnings by a low P/E is really double counting. Multiplying peak earnings by a high P/E, which is what we’re doing today, is also double jeopardy the other way.

It’s obviously the same for residential housing too; the yield needs to be higher to match interest rates, so the house must be worth less. 

These buildings are in a lot of peoples pensions - particularly in Aus. They keep them empty so they don't have to take the valuation downgrade - they keep trumpeting their 10% pa 30 year returns......   

Some good sense there Dr Y. Via my mailbox:

The biggest bubble I see in Australia is...

Commercial real estate (CRE) below <$10m. This sector has exploded in last 5 years because of CRE buyers agents, who have purchased more than $10bn alone in the last 5 years and retail who are having a crack themselves.

It's mainly unsophisticated investors who don't understand that CRE has short term loans with high vacancy.

These are always fine in the bull markets, but when business insolvency shoots up that's when the trouble begins. Was the same in 2005-2007 and early 90's.

Folks are literally buying at 5 cap rate (yield) and borrowing at 7%+ which is globally wild and similar to the last two big downturns in Aust. Negative spreads (yield less interest rate) are massive red flag in CRE and this is one of the most negative periods in history.

Loans are typically 5 years or less, and vacancies in a downturn can shoot as businesses go bankrupt.

The retail market isn't set up for this.

Banks in CRE are pushing the can down the road by extending loans when they don't meet ICR / DSCR covenants, but this is usually the start.

It's happening but will take some time to play out.

Institutional markets are now typically buying at 6% yields and borrow at 6%, which is significantly better but still somewhat heated.

Now that rates are not sure to go down over the next 12 month (Rate yield curve is showing higher rates), the risk has materially increased over the last two months.

I am very bearish.

And all it really highlights is a fundamentally flawed monetary phenomena, and a flawed asset inflation model that cannot be sustained (as we've seen again and again historically), that has a wide reaching impact on sectors of the economy and society.

The FIRE sector is the elephant in the room that nobody wants to look at.

More from Chris Joye. Breathing fire and like a hibernating bear that's been disturbed.

RBA and Fed clearly now captive to the political and asset pricing oligarchies where the central banks' inflation targets are not worth the paper they are written on as politicians wrest control of monetary policy back from unelected bureaucrats. Treasurer doing to the RBA exactly what his hero Keating did - taking policy control. The central banks will eventually be forced back into data dependence once the unpopularity of high and volatile inflation gets sheeted home to the politicians

Yes. Central Bank independence is exaggerated

OOPS! Berkshire Hathaway’s cash pile hit another record at $189bn as billionaire investor Warren Buffett sold ~13% of its stake in #Apple in Q1 2024. Buffett said he didn’t mind amassing the cash and said it could reach $200bn by the end of Q2. https://bloomberg.com/news/articles/2024-05-04/buffett-s-berkshire-says-cash-hits-record-as-earnings-gain?sref=R17xFhjo   Link

Have you considered that the only real effect is that the reduced demand, causing some businesses to exit a market, pushes the remaining firms further along their supply curves so they produce at higher volumes and at reduced cost per item? Also, that the remaining firms need to focus heavily on reducing the cost of production through innovation & investment in better plant and machinery? (In NZ's context where markets are small I doubt either have much effect but in larger markets, for certain types of goods and services, the effect is usually small but noticeable, and very occasionally substantial.)

Interest rates and money supply

Given the Treaty, how is tikanga Maori not relevant contextual / cultural information for legal education? He seems to be saying it’s not part of law - that’s hugely arguable, but even if it’s right, it is - again - besides the point.

given court protocol is to respect tikanga Maori, and allow for evidence in te reo, how is tikanga Maori not relevant to legal education ?